but we're not supposed to lose...

This morning I woke up to a beautiful sunny day full of sour faces here in New York City. On the train to work I heard all about how A-Rod sucks and Jeter is too old etc.Time to fire the GM, replace the manager, get a new third baseman and better pitching. As a Red Sox fan, I agree. The Yankees suck.

But I have to say New York’s reaction to a wasted season (any season where the Yankees do not win the World Series) makes me nervous. It is not the love of a winner that I worry about — we don’t start companies to do anything other than dominate a market and change the world — it is the dismissal of this entire season as a waste that kills me.

Proof that the fear of failing or being seen as a looser will change behavior was alive and well around town today: Many fewer Yankee hats on the heads in Union Square than yesterday for instance…

The Yankees are the incumbent. Each year they have to reassure their fans that they will win with an annual payroll that exceeds the vast majority of start-up exits.  Their fans love to root for the dominant force in the industry, the 27 time champion, 800 lb gorilla — systematically destroying opponents with more resources and raw talent at each position. When Yankee fans put on that hat each spring, they feel confident because there is no requirement for luck, team chemistry or an innovative approach to the game when you have free-agents…They need a sure thing, but have only won the World Series twice in the last 10 years. 20% success? Sucks right?

Imagine if your team had to gut it out for every victory, had to make due with raw talent that was willing to learn on the job and get more done faster for cheaper than anyone else just to stay alive? What would it be like to root for guys who had to hustle to sell tickets and hack the establishment to get noticed by customers? How would it feel to love a team that needed to convince investors of their vision and potential in order to play another year because they are burning cash instead of printing it?

It would feel like rooting for a start-up.

If you had to count on a combination of team, hustle and the occasional error by your opponent where the ball goes through his legs on a routine play in 1986 to win it all, you would be a Mets fan like all the guys in the First Round NYC office. Eternal optimists and loyal supporters of their team who do whatever they can every year to help them win…and sometimes they do.

anyone can put sugar and water in a bottle...or stuff in a box

Building a brand requires consistent delivery of a simple value. At AND 1 we built our brand on attitude and we infused everything we did with the trash talking swagger of an NYC point guard. Birchbox is building a brand by delivering delight from content to commerce.

It is a simple promise. It is hard to deliver.

When we first partnered with Katia, Hayley and Mollie we fell in love with their vision for a new eCommerce model. The subscriber count was less than 500 and the founders were folding the pink tissue paper and tying the bows in every box. They were 100% focused on consistently delivering delight to their customers at every touch point. Their vision was clear and the mission was simple. They were building a brand that would define a category.

Yesterday, Birchbox announced a new round of funding that will help them continue to scale the business and deliver on their brand promise. The coverage of the funding has focused on the company’s early success: the number of subscribers, the number of brand partners and their future plans to enter verticals beyond cosmetics. The growth has been incredible, but for me, the real story is not how fast the business has grown, but the way the founders have managed to scale even faster.

They hit product market fit and hyper-growth as fast as any company in our Community but managed to remain laser focused on delivering delight. The subscriber base is in the tens of thousands and the quality of the product and diversity of brand partners keeps getting better. Engagement with content is stronger than ever and the Birchbox voice, now spread across an editorial team, remains fresh and relevant to their customer. The total team has grown from three to well over 35 people and the sense of teamwork and ownership over delivering on their brand promise is as strong in the most recent hire as it is in the founders.

Regardless of department or role, employee, customer or brand partner, everyone is inspired by the Birchbox brand. It has deep meaning. It has a ton of value. I am honored to work with them and I can’t wait to see what happens next.

Brand building for the win!

When they fall, pick them up and pull them back in...

I got an e-mail the other day from a friend explaining that he was shutting his start-up down and would be joining a big company as some kind of VP of something. The role he is taking sounds very close to the job he left in the spring of 2010 to #beafounder. I tried to talk him out of it, but it was too late.

Having to give up on your company sucks for a month or two and it hurts forever, but it is not failure – if these teams are absorbed back into the world of cubicles and are allowed to return to the jobs they walked away from in the first place, that will be failure, and failure at the community level. When you meet the founder of  a failed business, reach out your hand, pick them up and do everything you can to keep them involved in our community…because our community depends on it.

My friend’s story is not unique. He had an idea, raised 12 months of runway from angels in the middle of 2010 and was unable to get significant traction or raise more capital. I am sure most of you know a few people who are facing something similar right now. I have been there, it is the worst. But how the community values the experience of a shut-down and the doors that it opens or closes for the founders is what really matters.

I think we will hear a lot more of these stories in the coming months and my prayer for NYC is that we all remember that the business may be a failure but the entrepreneur is not. Don’t forget, founders of failed companies had an idea and they pursued it. They quit their jobs (at big companies), convinced investors to provide the required capital and persuaded talented team to embrace their vision. The teams shipped product and learned from customers. They iterated on market feedback, they tested methods of customer acquisition and everyone that worked on the business learned more from their mistakes in the last 15 months than they could have from success in their 9-5 job.

The success of an emerging start-up scene depends on keeping homegrown talent in the game. We should treat the experience of a blow-up as a badge of honor. The scars of a failed company deserve deep respect and affirmative action from investors and start-ups starved for talent.

If you are one of the lucky founders who has hit escape velocity and can’t hire fast enough, make it a point to seek these people out. If they don’t want to join you, do your best to help them try again. It will come back to you in a stronger, deeper community supporting your efforts.

Don't forget to tell a story when you hit the stage

This weekend I was lucky enough to hang out at the Tech Crunch Disrupt Hackaton and then get invited to head over to BarCampNYC6. Over the course of the day, I was reminded of the power of deep passion and creative environments to pull the best from each participant and to focus the mind on moving from idea to implementation and back in endless layers. NYC Geek-er-y was in full swing but the narratives did not live up to the talent in the room.

After being up for more than 24 hours straight, over 100 teams at the Disrupt Hackathon were given 1 minute each to present their hack to the judges. The 4 winners, Gilt-II, Docracy, Dispatch.io and Doach, will be presenting on the main stage at Disrupt on Wednesday – and they are all very cool – but for me the biggest difference between these 4 and the other 99 teams had much more to do with the quality of their 1 minute presentations than the technical quality of their hacks or the creativity of their ideas.

Where the four winners separated themselves for me was by presenting a narrative that fit the data they had spent the weekend creating. They described what the hack was and showed us what it could do. They talked about how they built it, who would use it and why they would love it. “Once upon a time” to “happily ever after, The End” with 30-45 seconds of demo in the middle helped the judges know what they were looking at and why they should care.

Each team spent close to 1500 minutes straight creating their hacks. I saw super talented people building clever solutions to problems and in the process, creating data to support their bid to pitch on stage at Disrupt– data that was often lost in the one-minute demo. Sleep deprivation certainly played a role in these lost in translation demos, but I think with 15 minutes of preparation each team could have crafted an impactful narrative around their project.

With a 1 minute time limit, you can practice your pitch 10 times with 30 seconds of teammate feedback in between in 15 minutes. If each team had been able to craft a narrative to highlight their hack and practice a few times, my sense is 2-3 different teams might be on stage this Wednesday.

Either way, congrats to the winners and I look forward to seeing you bring together that perfect combination of story and data when you hit the main stage later in the week. Until then, I will be working on a high score in my new favorite game.

When I first met Charlie Robbins, CEO of Nodejitsu, I was reminded of the concept of “push when pulled” from Judo Strategy as he described his vision for the business and his passion for helping support the Node.js community. In short, when you recognize a strong movement in a market, rather than fighting against it, or trying to control it through ownership, you go with it by finding a way to embrace it. You push when it pulls. You build products on top of a technology trend, and rise with it. Even better, you build services that help others fully leverage the power of the emerging trend and feed the very wave of momentum you are riding toward success for the whole community.

I have said before that it is exciting to see the compression of the innovation stack due to (X)aaS businesses. The innovators in the ecosystem are being freed from commodity activity and are able to focus on translating their vision into code. Nodjitsu helps bring the vision closer to the consumer and allows the most innovative people building applications in Node.js to focus exclusively on creating rather than being distracted by backend support.

I/O rising with real-time points to the need for Node. Significant parts of the web are moving to a real-time environment where high concurrency and low latency are critical and massively distributed architecture is the norm. These applications are breaking down the silos of data in the cloud, and they will be required to deal withvariable latency/responsiveness from disparate databases. At the same time,users are demanding highly responsive applications that deliver rich experiences with deeply interactive UI.

In this world of concurrent applications, real-time messaging, MMOG, collaborative content creation and editing, the event based and non-blocking single thread architecture of Node.js offers a huge advantage and enables aggregating multiple data sources with differentresponse times into a single, highly responsive client application. Node.js is awesome. It’s here to stay and when I see companies like our portfolio company SimpleGeo using it, and people like Joe Hewitt tweeting about it I think there is little risk that it turns out to be a “fad” of a framework. It reminds me of Rails in 2005 or jQuery in 2007 and has crossed over from the realm of alpha nerd (still there: Erlang, Lisp, etc).

Not only is node.js extremely powerful for building evented, real-time applications, it also represents an evolution of Javascript and an expansion in its application to the server side. This is opening the doors to a deep talent pool of millions of front-end developers who have been confined to the browser for more than ten years. Now, with Node.js and Nodejitsu, they are able to build full-stack web applications with just a single language: Javascript.

In New York, we are usually thought of as a consumer web hub that lacks a focus on the layers of technology that live further up the stack. There are exceptions, and I am psyched that the Nodjitsu team feels like an outlier in terms of their technical focus. I also love that they are young and ready to take on the world. These guys live to code and could not be more passionate about evangelizing Node.js. They are solely focused on delivering a platform that supports rapid adoption and friction free deployment of the most innovative applications in the space and on doing it right up the street from our office, here in NYC.

Design creates innovation (even in the most common elements)

I see the rise of design thinking in all sectors of internet-enabled businesses. The rapidly evolving building blocks of the web, modern programming languages, open source projects, and cloud -resources, are pushing the cost of getting to launch toward zero. (X)aaS platforms are compressing the innovation stack and reducing engineering pre-requisities at a similar pace. The dramatic reduction in the cost of a development cycle has spawned the lean start-up and with it, a new appreciation for consumer feedback and iteration. The question entrepreneurs have to answer is no longer  “can this be built and by who?” but, “should this be built and for who?”  This is design thinking.

At the core, design is an inductive language, moving from individual need to possibility and every start-up should have a native speaker on their leadership team. Designers listen to individuals and identify simple narratives. Problem solving is driven by insights and understanding, product testing through rapid prototyping and iteration, iteration, iteration. The agile principles of the lean start-up are key tenants of a great design process and this confluence makes me believe designers will be the most critical talent shortage for start-ups within the next 12-18 months.

When I started working with designers at AND 1, design was a foreign language for me. My first design briefs included a generic description of the consumer and the commercial constraints of the product (price etc). They were requirements documents or product specs, not design briefs. The products did not do well and I will never forget the feedback from the design team on my product direction:

Not visual. Not emotional. Not personal. Not helpful.

The design team hammered me to look at more than what the kids were wearing on the court, but also what they were buying, what moved them and what they aspired to – cars, motorcycles, architecture, song lyrics, ads, movies and tv shows – and focus on understanding the motivations, not the actions. In this transition, I understood the power of inductive thinking and became obsessed with observing the individual in order to translate day-to-day actions and underlying motivations into the visual and emotional language of design. I started looking for the “damn factor” in everything and working to see mid-summer snowballs before they melted. This practice has stayed with me and I continue to see design as the language of innovation and get excited when an entrepreneur is a native speaker.

In my role at First Round, I am starting to meet entrepreneurs who are building design-focused companies. They have a deeply personal relationship with the consumer that drives their products to be dramatically better than alternative solutions and I love this. As a global design hub for fashion, architecture, furniture, art and media, New York is a fantastic place to build a design-centric company. If you are investing in design in your start-up, I hope we can connect.

For the last several years, I’ve lived in Philadelphia – and have spent a fair amount of my time on planes and trains — making trips to Boston, New York, the west coast and anywhere else kick-ass entrepreneurs are attacking big-ass markets. However, as the New York ecosystem has continued to grow, what started out as a weekly trip from Philadelphia to NY has become an almost daily commute.  The vast majority of companies in our portfolio that I work with are located in NYC – and, as a result,  most days of the week, most days of the year, I give 4 hours to Amtrak.

Four hours of daily commute is a lot of time.  While it allows me time to keep my inbox up-to-date (for the most part), it is time I can’t spend meeting with new entrepreneurs or helping our portfolio companies.

That’s why I’m super excited to announce that my wife and I are moving to New York.  This will give me 20 additional hours each week with the 35%+ of our portfolio that calls New York home.  This is 80 hours each month in our office on Union Square working with Howard, Chris and Charlie to be more available, more prepared and more helpful to each founder we have the opportunity to connect with.

I’ll continue to spend time travelling – to Boston, Philadelphia and elsewhere in the country.  But I am super-excited to shift from Amtrak to the L train. To live in the center of a rapidly growing and amazingly vibrant community of founders and investors. To become a fulltime part of the First Round Capital New York office and to officially add my name to the list of LOCAL resources available to the NYC community.

If you have decided to be a founder I would love you to teach me about your business. If you have decided to be a founder in NYC, I hope the lesson can occur in person.

trying them out is the only way to know what to buy

When you picked up a shoe at Tony’s, a sales guys would give an approving nod and mention the story of the shoe, the design, the athlete or artist endorsing the product. When you asked to try it on, he would head to the back, and not only bring your size in that shoe, but also an arm-full of matching shirts and other gear. During your try-on session, a couple other pairs of shoes that you didn’t ask for, but that the staff thought you should try would show up in your size.

This process would repeat trip after trip and I always walked out with more than I needed and less than I wanted.  Finally, Tony let me in on his secret:

If they smile when they try, they WILL buy.

At First Round we have e-commerce in our blood and have been active investors in the space. We continue to look for the next wave in e-commerce innovation and hope some of the companies we partner with will play a role in changing the current e-commerce landscape . When we had the opportunity to meet the team from Birchbox their vision resonated with our experience and view of the opportunity in the e-commerce space.

As they described the Birchbox service I could hear Tony in the back of my head,

If they smile when they try, they will buy.

A subscription to Birchbox elevates product discovery and brand experience to the top of the consumer purchase decision process. For $10 a month Birchbox members discover and experience premium beauty products in the form of specially selected deluxe samples delivered to their door. The monthly discovery package is accompanied by a fully integrated editorial and e-commerce platform offering instructional videos, news about the products and the opportunity to buy full size versions of the products that you try and then fall in love with.

Just like the “previum” model in the digital world, one of the most powerful ways to motivate purchase and long-term consumer loyalty in the physical goods space is to deliver a full product or brand experience. When this process includes new product discovery and unique items that surprise and delight the customer, and includes expert advice on the best use of the product and the stories that define the brand the impact is even deeper.

This is the Birchbox vision and we are excited to help them achieve this kind of consumer impact. We are also lucky to be joined in this effort by a great syndicate including Accel, Harrison Metal, Lerer Ventures, Gary Vaynerchuk and Consigliere.

If you are a beauty product connoisseur I hope you will join Birchbox and if you know a beautiful person, an annual subscription makes a great holiday gift.

Better than a Bank

My first lesson in the power of “simple” came from one of my favorite basketball coaches growing up. He used to spend most games and practices encouraging us to kiss – Keep It Simple Stupid. He did not believe in having lots of plays to memorize or complicated defenses to run. He was old school and showed us that a mastery of spacing and well-timed changes in speed and direction combined with hard work was all it took to be a great team. We played simple. We won a lot of games.

When you can identify a single, core belief to measure your efforts against, you have an extremely elegant way to focus the efforts of your team and drive toward success. When you can use technology to cut through complexity and deliver on the promise of a massive industry that has lost its way you have a huge opportunity.  When we met with the founders of BankSimple we were blown away by the vision and the team. It was obviously a punch the sky mission and we could not be more excited to participate in a great New York syndicate with IA Ventures and Village Ventures as well as the fantastic group of angels supporting this deal.

At its core, the mission of a bank is simple and implies a focus on serving the customer in a trust based relationship

A bank connects customers with capital deficits to customers with capital surpluses.

Banks used to deliver on this promise back in the day when people had a personal relationship with their bank. They knew their favorite teller and said hello to the branch manager at the local restaurant or bar. The bank was a place to go for advice and guidance as well as to deposit capital surpluses or contract to borrow when facing capital deficits.  Things were simple and it worked.

To provide service in this way, banks built out extensive networks of local branches. These direct points of contact with the consumer enabled banks to provide excellent, personal service and to leverage their hands on relationship to offer loan products and generate revenue.

The world has changed but banks have not.

Technology eroded the consumer need for branch visits through ATMs and online banking. Finding the best loan product is more efficient on the web and the increase in competition has been a huge victory for the consumer. However, the banks have found ways to get even and continue to support their branch infrastructure costs with confusing policies and painful fees.

The industry has strayed significantly from the one sentence mission above and now it takes pages just to explain the costs associated with opening and managing a basic checking account.

Page after page of fees...

The team at BankSimple is going back to basics and building the one sentence bank. They are using technology to eliminate costs and design to delight the consumer with an experience that makes sense. The vision is simple, the mission is complex and I am juiced to be involved.

Cheers to everyone out there pursuing their passions as businesses, hobbies or side projects. No matter the outcome on paper, you have won the game.

I have embedded my portion of the evening below along with the slides, but all the videos are available on Vimeo. I am not sure when the next Hobby NYC event will be, but I will be there and it will be great.

Here is the talk:

Hobby: Phin Barnes, Sneaker Addiction from Harvest on Vimeo.

and here are the slides:

Since June, I have been hanging out in the New York tech scene (and getting back into the NYC-kicks scene as a sneakerheadVC) and think the environment that cradled jazz and created Hip-Hop is now supporting a new generation of creative talent. For me, the key to the NYC community, what makes it sexy, is a culture that expects to win and to win big. Certainly the urban density and the consumer insight this offers to those who will listen is powerful and the scale required for notable success in this environment sets a high bar for entrepreneurs to judge themselves against, but it is the swagger of NYC, the assumption of victory and pride in the success of other New Yorkers that defines this movement.In my mind companies being built in NYC have advantages and these advantages led an entrepreneur to tell me, “I don’t care what they do. I am in New York, they aren’t. Ultimately, we will win.”

The reality of starting a company in NYC is an environment that shapes your thinking as an entrepreneur:

1. User feedback — surrounded by millions of people who will try shit, interrupt you and tell you what they think. NYC start-ups know they have to iterate early and often or become irrelevant. Stealth doesn’t happen here.

2. Not afraid to jump — you have to have guts to live in NYC in the first place. Starting a company is hard, but the street-smarts required to survive the bright lights and big city serve New York founders well.

3. Really big pie — when the center of the universe is outside your front door, you don’t view ideas or the entrepreneurial ecosystem as a zero sum game — collaboration, not competition, is the dominant approach. Entrepreneurs in The City know each other, help each other and root for each other. They are also honest with each other.

4. Culture of winning — success is expected in NYC. Home to the world’s most famous arena, Wall Street, Hip-Hop, Madison Ave. and the fashion industry–if it is not a big idea it is not getting airplay in NYC. But everyday new ideas spring up and take shape as smart, highly motivated people are inspired by their environment and informed by their community.

5. No sleep ’til Brooklyn — the answer to “what do you do?” in NYC is your job. In New York people live to work, love to crush and the entrepreneurs find time to have a blast doing it. I have been lucky enough to work hard and play hard in NYC this year and I can’t think of a better place to do it or a better group of people to do it with.

If you have other reasons that NYC is creating so many sexy companies with such great commercial potential, I would love to discuss in the comments and if you want to include me in your hard work or play in 2010, shoot me an e-mail (phin@firstround.com) or find me on twitter @phineasb