Angels and Vultures

You mostly know me as a writer, musician, poet, rapscallion or scoundrel, but in real life, I’m a corporate executive. I work for a small company that I founded with a couple other guys back in 1996. My job is Alpha Geek. I control the technology platform on which our business is built. Over the years, I’ve learned first-hand how small companies get funding, and I’ve noticed that when I explain a lot of this stuff to people, they are surprised. So I thought it might be interesting to lay it all out.

Starting a technology business is tricky. You need to develop things to sell, but until you’ve developed them, you don’t have any money coming in to pay salaries and rent and the minutiae that comes with creating a business. You need some seed money to get going. Sometimes people use their savings or a second mortgage on their house as that seed money, but that generally isn’t going to work for a technology startup. These need more money than that.

Raising money for a startup is particularly tricky because almost all startups fail. It’s a terrible investment.

Back in the late ’90s, the popular way to get started was with “Angel Investors.” These were basically rich old white guys who had been in business forever. Angel Investing was a little like charity work, because most of the businesses these angels invested in would often fail. They’d never finish the product, or they’d find there was no market for the product, or some big established company would bring basically the same thing to market, or the founders would just be really bad at running a business. Whatever the reason, most startups fail, so investing in them is either really stupid or really nice. Angels aren’t stupid, so we have to assume they are just nice. The ones I know are all incredibly nice people. You have a hard time reconciling how nice they are with how absurdly wealthy they are.

Although most businesses would fail, a couple of them might succeed. The definition of “succeed” is a little weird though. It usually means to move on to the next stage of funding: Venture Capital. Back in the ’90s, there was a lot of Venture Capital (VC) money looking for a place to invest, so they’d often overpay for small technology companies. Since the Angel Investors would own a large portion of these companies, they would make a really good return on their investment when the VCs bought them out. Like, a really good return. Like, they invested $100K, and they got a few million back. Really, this only needs to happen once, and it’s paid for all the businesses that failed. These rich old white guys are rich for a reason.

The other definition of “success” for a small company was to be acquired by a big company. That was more rare back in the ’90s, but not unheard of. It still happens today, like when Facebook bought Instagram. It tends to happen when a big company’s stock is ridiculously overvalued. That allows the company overpay for things.

Venture Capital is a lot like those Angels, except on a bigger scale. The way a VC firm works is that they start a “fund” by getting a bunch of really rich people to invest. Sometimes they also get institutional money, like pension funds. Each VC fund has three phases and lasts a few years. First, they raise the money, then they invest it in small companies, and then they sell or kill the companies. When they sell or liquidate a company, they plow the proceeds back into the other companies in the fund. At the end, they need to show a 20% annual return on investment for the people who invested. If they can’t, then things get really, really, really bad for the VCs. As in, the individuals running the funds have to come up with their own money to make good and stuff.

Back in the ’90s, running a VC firm required absolutely no skill. As long as one of the companies in your fund managed to get to IPO (Initial Public Offering—selling stock in the company to the public), you’d make such a killing getting people to overpay for the company in the stock market that you’d easily cover your 20% commitment. As a result, VCs at that time were run by people who knew about money and relationships, but didn’t know anything about business. Building a business you can get to IPO is a completely different thing than building a real business. It was all about crafting a great story of what the company might be able to do. Almost all the VCs I’ve ever encountered were old-money guys. People who had never really worked a day in their life. They inherited money, and used some of that to buy their way into a VC firm.

Then the dot-com crash happened.

At this point, it’s necessary to introduce the concept of the cram-down. Each investor in a company owns “shares” of that company. Let’s say the angels own 60% and the founders own 40%. Suppose we have 100 shares of stock, and the VCs come in. Let’s say they decide the company is worth $10M. They could give the angels $6M and the founders $4M, but it doesn’t work that way. Instead, they give $10M to the company, which then issues new stock. Let’s say 900 shares of new stock. So now we have 1000 shares worth $10M, or $10K per share. The VCs own $9M worth, the angels own $600K worth, and the founders own $400K. That’s called a cram down, because the issuing of new stock resulted in the value of the original investors’ stock getting crammed down to a much lower value. (In reality, the VCs would also give the founders some new stock too, so that only the angels get screwed, since you need the founders around to get to the IPO.)

A typical company will take VC money three times before getting to IPO, so that cram down happens 3 times. On the next round, that $600K angel value is crammed down to a value of $60K, and the next round crams it to $6K. The angels’ original shares become essentially worthless.

Before the dot-com crash happened, valuations were a lot higher, cram-downs were a lot less brutal, and there were fewer rounds of VC investment. But after the crash, it became impossible to IPO. So the VCs found that they needed to have actual operating businesses in their stable. Except, funny story, they have no idea how actual operating businesses worked, and they kept accidentally killing them off. Too bad that 20% requirement still loomed. The VCs saw their own fortunes at stake, and they got really mean, really fast. That’s when everyone started calling them “Vulture Capitalists.”

So angels are, for the most part, now extinct.

If you hear someone say they have Angel Investors these days, that’s probably a euphemism for “I borrowed money from my dad.”

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Establishment Clause vs Santa Claus

I’ve written before about being an Atheist in a Theist Land. The gist of that story is that while America is very tolerant of various religions, the idea of having no religion at all is very difficult for a lot of people to deal with. This country, which is supposed completely separate church and state, actually has “God” plastered all over the place. From our money, to the Pledge of Allegiance, to the music they teach our kids to sing in public school.

You might think that I’d be happy that our new elementary school principal is a grade A, first class Grinch, who is doing everything in her power to expunge every last bit of religion from our schools. (Although they still say “Under God” in the pledge, and they say the pledge every day, so I guess some cows are still sacred.) You might think I’d be happy about that, but you would be wrong.

I live in a small New England town. It’s the kind of town that still has a nativity scene on the town common around Christmas (and no other religions represented), and has Christmas this and Christmas that in the schools this time of year. At least, they did until this year. For example, there is a very long tradition of the PTO (Parent Teacher Organization, which is basically the PTA except there’s a trademark on that or something, so they use PTO) setting up a store in the school for one week. They called it “Santa’s Workshop” and kids could go there and spend a few bucks to buy presents for their siblings and parents. They kids loved it. The parents loved it. Everybody fucking loves Santa’s Workshop. So it was quite a shock when the new principal (with backing from the superintendent) declared that it wasn’t happening this year.

It was particularly shocking to the PTO, which had not been warned, and was about to be stuck with thousands of dollars of inventory. There was a negotiation, and it was decided that the event could go on as usual but they had to change the name. And although they could sell any holiday-themed inventory they still had, they shouldn’t restock anything holiday-ish for next year.

Similarly, the elementary school holiday concert is having its music program censored to get rid of all the religious stuff. I hear “Jingle Bells” is OK, but “Up on the Rooftop” is not.

I guess that the old approach of throwing in the Dreidel Song and something about Kwanzaa to inoculate the school from that darn Establishment Clause of the US Constitution isn’t considered sufficient any more.

I think this is all positively stupid. Let them sing about Santa. Who gives a fuck?

Let’s look at an analogy. There is an old religious institution called “Marriage.” It got pretty popular, and when this secular government of ours was created, there were a lot of legal ramifications of two people being married. So the states created a legal Civil Union and called it “Marriage.” I know it’s confusing because it’s called the same thing, but the two institutions are totally different. My first “Marriage” was to a Catholic girl, but we didn’t get married in a church, so as far as the church was concerned, we weren’t married. People can get married in a church, but if they don’t have the right paperwork from the state, that doesn’t count as far as the government is concerned. Plenty of gay couples and polygamous couples have had to deal with that over the years.

So there are two things called “Marriage.” One is religious, and one is secular, and other than the fact that a lot people do both at the same time, there really isn’t any connection between the two.

Christmas is exactly the same way. There is a religious thing called “Christmas” that’s about the birth of Jesus, and the story of the nativity and all that. And there is a secular thing, also called “Christmas.” You’ve got Linus’s take:

And the angel said unto them, ‘Fear not: for behold, I bring unto you good tidings of great joy, which shall be to all people. For unto you is born this day in the City of David a Savior, which is Christ the Lord.

And you’ve got Lucy’s take:

You know, Santa Claus and ho-ho-ho, and mistletoe and presents to pretty girls.

And they’re both right. Linus is talking about the religious “Christmas” and Lucy is talking about the secular “Christmas.” And, like marriage, it’s super confusing because we use the same name for both things, and they happen on the same day, but they are two totally different things.

In my house growing up, we celebrated the secular version. We had a tree and presents. We sang carols, and Santa came. We did not go to church, watch a Nativity Pageant, or do anything remotely solemn.

So that brings us back to the public schools and the Establishment Clause. I absolutely agree that they should not be celebrating religious Christmas in the schools. They should not have a nativity scene in the lobby, or crosses on the walls. I’m actually OK with them singing religious carols at the concerts, because music is different. It rides above all this secular/religious bullshit. Great music is great music. I don’t give a shit what it’s about or what significance some group has attached to it. But I digress.

Keep that religious Christmas out of the schools. Absolutely.

But Santa Claus? He’s got nothing to do with that. Santa is all about greed and gluttony and capitalism. And our schools are all about teaching our kids to be good consumers. Nobody complains about the schools celebrating Earth Day. It seems that Valentine’s day is still just fine, even though there’s a “Saint” vaguely connected to that one. Same with Saint Patrick’s day. Secular Christmas—Santa’s Christmas—is just like those holidays.

Let Santa’s Workshop be called Santa’s Workshop. Let them sing songs about reindeer.

If they really want to confront the establishment issues in schools, let’s start by deleting that “Under God” from the Pledge of Allegiance. Because that’s fucking obnoxious.

Happy Birthday

Today is the day that we celebrate you

You, whom I love
You, whom I long to have
You, whom I need to survive

Today is the day that we sing your praises

Your beauty that only increases over time
Your charm that makes everyone who meets you, love you
Your strength that envelops everyone around you, protecting us

Today is the day we express our gratitude

For caring for us
For tolerating us
For loving us

Today is the day we tell you how happy we are that you exist

Best of Alfageeek: My Big Ridiculous House

The right filter makes it look like your house doesn't need to be painted.

The right filter makes it look like your house doesn’t need to be painted.

I decorated my Big Ridiculous House for the holidays last weekend. I used to string lots of lights, and set timers, and stuff. But over the years, we’ve simplified. Now I just put some wreaths up and we light the place with some flood lights like you’d use for painting. The consensus in town is that it’s lovely. And boy is it easy! I’ve written about the house before, and that’s today’s best-of: My Big Ridiculous House.

Moanin’

It’s been a while since I did an audio selfie here, so here’s a session recording from a couple years ago. Same group I introduced in the Listen Here post. A couple things to listen for:

When Michael solos at about 4:10, I switch from sax to piano to comp some chords. That’s pretty much the extent of my jazz piano ability.

At 5:30 I quote Fever. At that point Michael and I start trading fours. That’s where each guy plays four bars (16 beats) and you go back and forth. The idea is to play off each other.

The song is a jazz standard dating back to 1958. Written by Bobby Timmons and recorded by the Jazz Messengers. It’s been covered about a zillion times since then.

Texas Roadhouse

The other day, my family went to Texas Roadhouse. In case you haven’t heard of it, this is a restaurant chain that started in Indiana and currently has headquarters in Kentucky. For those of you not familiar with US geography, Indiana and Kentucky are both states that are not Texas.

You’ve heard of Texas. That’s a southern state full of crazy people with guns. They have two political parties—the Republicans, and the other Republicans who call themselves Democrats to avoid confusion. We have a similar system here in Massachusetts. We have the Democrats, and the other Democrats who call themselves Republicans to avoid confusion. I’ve been to Texas several times, and it is basically exactly a caricature of itself. So it’s relatively easy to make a Texas-themed restaurant, even with the disadvantage of being from Kentuckiana. (Kentuckiana is what the locals call the area where Kentucky and Indiana bump into each other — I know this because I’ve been there and they all think it’s such a clever thing to say that they all say it constantly.)

The second thing you’ll notice about the Texas Roadhouse is the barrel of peanuts in the corner. The first thing you notice is all the peanut shells on the floor, but you quickly deduce the source (unless you are actually from Texas, in which case, what the fuck are you doing at Texas Roadhouse). My kids really enjoyed this part of the experience. There is a deep visceral pleasure to be found in tearing the shells from peanuts and throwing them on the floor. Apparently. My youngest doesn’t even like peanuts, and she was shelling them too. She simply threw the peanuts on the floor as well. God knows where they ended up.

The next thing you’ll notice is the noise. Oh. My. God. THE. NOISE. It’s as if the place is designed to maximize the fucking noise. I’m pretty sure the employees should be wearing earplugs to protect them from the GODDAMN NOISE, but since they have to take orders from customers, that’s clearly not practical. Every interaction involves quite a lot of shouting. This is an excellent place to go with people you really do not want to interact with. For example, it would be a top notch destination for after-work drinks with coworkers.

A major contributor to the noise is country music. It wouldn’t be accurate to say that I hate country music. My loathing of this “art form” goes so much deeper than just hate. I despise it wholly and viscerally. And the funny thing is that it would be so easy to fix this problem with country music. The “vocalists” just need to shut the fuck up.

If you compare rock and roll to country music, and you listen carefully, you’ll notice that the chord progressions, rhythms, and instrumentation are nearly identical. They are playing the same simple songs. But country music is different because of that twangy, warbling (twarbling?) way the performers sing. If they just shut the fuck up, it would actually be quite listenable.

Anyway, popular country music is blaring at this place. This contributes quite a bit to the noise, and to my general revulsion at the atmosphere. (That, and trying to recreate Texas of all places.)

We arrived at the table and were greeted by our waiter, who was clearly stoned. However, he made it work. He had found just the right level of THC to take the edge off, but still allow him to write orders accurately in his little notepad. My wife ordered a Hendricks and Tonic. We were pleasantly surprised when he affirmed that they had Hendricks, so I ordered one as well. He asked if I wanted a “double for $2 more.” I quickly did the math. Assuming a single is 1oz and a double is 2oz, then I’m paying $2 for an ounce of gin. There are about 25 oz in a 750ml bottle, and so that’s valuing the bottle at about $50. A bit high, but not outrageous, so sure! Double mine!

He had to come back shortly thereafter to give us the bad news that they didn’t actually have Hendricks, so we’d have to settle for Bombay Sapphire, which is still a hell of a good gin.

Alas, there was an error in my math. It turns out that a “single” contains no gin at all, and the “double” contains twice that much. In retrospect, I wonder why he bothered to tell us about the gin mix-up, since they could have not poured the Hendricks that they didn’t have just as easily as not pouring the Sapphire that they did have. They could have even charge a premium for the notional spirit. But at least the tonic was awful.

I’ve mentioned before that the key to a good gin and tonic is to use a tonic water that is not horrible. Store-brand tonic should be avoided. The same is true for bar-gun tonic. If the tonic destined for your gin comes out of a hose and not a bottle, find a new bar. As it turns out, leaving the gin out of a bad tonic doesn’t help it one bit.

As we were sipping our bad tonics, the strangest thing started happening. Eight of the servers started line dancing. Line dancing is to actual dancing as country music is to actual music. Dancing and line dancing have nothing in common, despite the name. There is no joy in line dancing. It’s people with dour expressions staring at one another’s feet and trying to remember a series of steps and turns and claps. I’ve seen more emotion from a Japanese dancing robot. This bizarre ritual went on for a few minutes, and then as suddenly as it started, the employees all dispersed and went back to work. It was quite odd.

My 8-year-old noted the irony that all these miserable-looking people were wearing shirts that said “I ❤️ my job.” You can imagine the management consultant who came up with that idea. “The employees hate their jobs and hate the restaurant. Instead of turning down the wretched music, or getting rid of the peanuts underfoot, or discontinuing the required line dancing, how about we just make them wear shirts that convince them they are happy.” It was actually kind of funny. In kind of a miserable way.

As it turns out, this restaurant also serves food. And it really wasn’t too bad. They start with fresh rolls that are packed with sugar and give you lots of butter that has cinnamon mixed into it, so you basically have cake as an appetizer. Really, really, really good cake.

I ordered a simple 6oz filet rare. I usually order “black and blue” which means cooking for an extremely short time on extremely high heat. But they had no idea what that meant (how does a steak place not know this?), so I ordered rare. Each entree comes with two sides, so I ordered steak fries and a salad. The salad was fine. The fries were fine. And the steak was perfect.

The key to a good steak is to not fuck it up. Start with a good cut (not hard for a restaurant—they get all the good cuts). Just a little salt and pepper and don’t overcook it. Boom. Great steak. That’s exactly what this place did.

The prices are also extremely reasonable.

My wife and kids were happy with their food as well.

So what I’m saying is, it’s actually not that bad, and I’m sure we’ll be going back again and again.

 

Best of Alfageeek: Fallen

For today’s best-of, I’ve decided to roll the way-back machine to the first poem I posted on this blog. I’ve been writing poetry on and off my whole life, but pretty much only during the courting process. So writing poems for general consumption, and not for the express purpose of wooing a single female individual, is sort of a new thing to me. So here’s the one that started this journey. It’s pretty short. Maybe you’ll like it… Fallen.