I am delighted to announce that ff is expanding significantly.  Firstly, we are very excited to add David Teten as the second Partner in our history and Michael Yavonditte as a Venture Partner in the Firm.  David is Chairman of Harvard Business School Angels New York and an experienced entrepreneur.  He has founded three startups and sold two, most recently selling Circle of Experts to Evalueserve.  Michael is CEO of one of the fastest-growing New York statups, Hashable, and was CEO of Quigo (sold to AOL for a reported $340m), in which we were a seed investor.

These are two of the most talented and experienced entrepreneurs in New York and our Firm is privileged to be associated with them. They bring great talent and heft to what is becoming one of the leading super-angel/micro-VC firm in New York.   As our assets under management are growing fast, it was the right time to add these top-notch partners to continue our high-involvement style of investing that we believe correlates with the best returns.  We have room for a few interns this fall to support our enlarged team; application information is on our careers page.

Second, we have restructured our website to address questions we are often asked, such as where our portfolio companies are located, what themes we invest in, and to provide resources and links for entrepreneurs.  We plan on adding many features to the site over time that can help startups, well, start up.

Finally, we are in the process of building out over 5,000 square feet of space in New York to house ourselves as well as a number of companies we are invested in, such as Parsely and Phone.com.  We might have a few desks available for rent for likeminded members of the NY community, subject to our portfolio companies’ growth.  If you have interest in joining us in our space, please reach out and let us know.  We have some very unusual ideas for how the space will be designed – watch our blogs for details.

This is a new chapter in our Firm, but a continuation of process to build an awesome contributor to the New York and global startup community.  Since 1999, we have made over 100 investments in over 35 companies, and from the beginning we have been highly focused on generating industry leading returns. Among our most successful seed investments that have reached maturity are Cornerstone OnDemand (which raised $137m in a March 2011 IPO, ticker CSOD) and Quigo Technologies.  We have a large crop of exciting growth companies that are starting to come into their own.

When each of my kids heads to college they get the DASC (drugs, alcohol, sex and credit card) speech.  They know the first three well and have given me the rolling-eye-yawn response years before.  The focus, though is the last and to make sure they understand that college debt, like each of the first three has a similar characteristic.  It can have multi-year impact on their life and how they get to enjoy post college life.

So many kids graduate college with a fantastic understanding of what life can offer but with crushing debts that take years to pay off.  They get no education about the downside of debt, that leverage is a two edged sword and that debt is financial servitude.  Don’t get me wrong, debt has its place and for most of my adult life I have had a mortgage and borrowed money when appropriate, but like alcohol moderation is key, and only in the right circumstances.

I think most epiphanies are trite as soon as they are discovered.  It might be pithy, or simple, or even “elegant” as we used to say at college, but ultimately it is trite and obvious once it is stated.  The Internet is a black hole.

There is a great giant sucking sound, and it is of everything that was physical in my childhood being virtualized, vaporized, digitalized and dematerialized;  News, newspapers, magazines, books, books-on-tape, cassettes, records, CD’s, DVD’s, home movies, theater movies, televisions, telephones, mail, junk mail, voice mail, shopping, dating, researching, reviewing, trading, banking, gaming, you name it.  Moore’s Law, productivity, capitalism are all drivers here, but in the process we replace physical interaction with objects with pseudo-interaction via keyboards, mice, and “touching” images on screens.  The human mind is so malleable that it is able to ignore the difference between what is real and what is its representation:

No.  They never should, and if they do then it indicates a lack of drive, verve and creativity in reaching angels and VC’s.

Here is how I see it:  VC’s make money by investing in successful companies, and like to believe that their input along the way with regard to ideas, best practices, contacts and reputation bias the outcome – I certainly do.  To ensure that they get to see good ideas they meet a lot of people, and will invest in a single digit percentage of those they initially meet with – the funnel.  Every VC tells me that the best ideas they get are vetted by people the trust and not the result of receiving a presentation in the (e)mail.  I can personally attest to that.  If someone smart that you trust says “look at this”, you will.  I think in the past year I have had over 300 hour-plus conversations with entrepreneurs pitching their ideas – and this is just the initial meeting or call.  Some subset have led to multiple meetings, calls, research hours and the end result has been less than a handful of investments in the fund this year ~ about a 1% pitch-to-investment ratio.  Time will tell how many great ideas were passed on.

Why do we reject 99% of ideas presented to us?:  There are many reasons, some can be articulated and some not.  There are probably a handful of common reasons that account for the majority of the non-invest decisions; portfolio fit, people fit, management, size, terms, and addressable market.  A random selection of some of the questions we think about are (in no particular order):  Does this fit our investing criteria?; Is the idea big enough, yet the execution focused?; Does management listen?; Is this a team and an idea that we want to spend then next 5-7 years being around and thinking about?; Is the investment at a reasonable valuation?; Are the terms reasonable?; Does the capital raise get them to profitability and if not then do we care for the risk?; What is the operating leverage in the model?

What entrepreneurs should do to increase success?: In fact there is quite a lot here.  In fact how a management pitches an idea and manages the fund raising process is telling of itself, and something we listen to.  In simplest terms know who you are talking to and what you want out of the conversation.  Your objective should be to find the VC that has the best fit for you.  To do that start by leveraging your contacts and the web to identify potential VC’s.  If you have direct contacts use them to get a personal referral to a VC.  Before your first conversation with a VC review their website and see if they describe their investment philosophy, list their portfolio and describe their ideal investment.  If they do, then are you a fit?  If not then ask the VC if they know of another VC that might be a good fit.  It is a job in itself, and so paying to pitch seems to be a good shortcut, but in reality there are no good shortcuts here.