A few months ago, I asked Jason Mendelson a few questions for Preferred Returns, the newsletter of the Private Equity and Venture Capital Committee of the American Bar Association Section of Business Law. If you haven’t met Jason, he’s a very down-to-earth guy who is incredibly pragmatic, intelligent and creative. Plus, he’s in a band, which makes him all the more likable. Below is the text of our interview and a bit more about Jason:
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Jason Mendelson has over a decade of experience in the venture capital and technology industries in a multitude of investing, operational and engineering roles. Prior to co-founding Foundry Group, Jason was a Managing Director and General Counsel for Mobius Venture Capital, where he also acted as its chief administrative partner overseeing all operations of the firm. He currently serves on the board of directors of Brightleaf, Next Big Sound, Oblong, Organic Motion and Pie Digital for Foundry Group..
While at Mobius Venture Capital, Jason was actively involved in serving on boards of portfolio companies and the negotiations and structuring of all financings, mergers and exits in the portfolio. He has also gained valuable experience as a restructuring expert during the challenging “Internet bubble” time period.
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Prior to his involvement with Mobius Venture Capital, Jason was an attorney with Cooley Godward Kronish LLP, where he practiced corporate and securities law with an emphasis on representation of emerging companies in private and public financings, mergers and acquisitions. As an attorney, Jason has consummated over $2 billion of venture capital investments, $5 billion in mergers and has extensive experience in fund formation, employment law and general litigation, serving as an expert witness in these related fields.Before his legal career, Jason was a senior consultant and software engineer at Accenture where he focused on financial institution re-engineering engagements. While at Accenture, Jason supervised programming teams up to forty people in size and was responsible for managing deliverables in multi-billion dollar engagements.
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As one of the first full-time, in-house general counsels at a venture capital firm, Jason has been on the forefront of thought leadership and has co-chaired the National Venture Capital Association’s General Counsel group and is an active participant on the NVCA’s Chief Financial Officer group. He was one of the key draftspersons for the NVCA model document task force which created the industry’s first set of standardized venture capital financing documents, which has greatly aided in the efficiency of completing these types of deals.
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Jason holds a Bachelor of Arts degree in Economics, with distinction and a Juris Doctorate, cum laude, from the University of Michigan. He is an active musician playing drums and bass guitar in several bands (including Soul Patch with his partner Ryan McIntyre) and enjoys home remodeling and travel. Jason was chosen as one of Denver’s “40 under 40” in business in 2009. Jason blogs about his experiences in the venture industry on his blog Mendelson’s Musings (http://www.jasonmendelson.com/) and www.askthevc.com.
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1. As a “reformed” lawyer, you bring a unique perspective to being a venture capitalist. How did you make the transition from law to investment management?
Just hanging around the water cooler too much, I guess. Seriously though, I had a background in software engineering and have always been on the bleeding edge of new products and services. Being around folks who knew how to evaluate talent gave me the rest of the toolset that I was missing . Also, I had tremendously supportive partners who strongly encouraged the change.
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2. Tell us your opinion on how lawyers are generally involved in the venture capital process and how that role can be improved.
It’s all over the map, depending on the sophistications of the entrepreneurs and VCs. As I’ve written about in my blog (www.jasonmendelson.com), the thing that frustrates me the most are the large bills on simple early-stage financings where the business people are sophisticated and have already worked out all the important terms. Sometimes this is just lawyers run amok, but a lot of the time is archaic processes that firms use to complete these tasks and to satisfy their opinion committees.
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3. What should venture capital lawyers be doing to help entrepreneurs be more successful?
Listening, especially in the early stages of the relationship. Many times by the time I want to fund a company, we find something in the diligence that should have been cleaned up before we got to this point. Usually it’s because the entrepreneur and lawyer haven’t gotten to know each other well enough or have mis-communicated previously.
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4. What should venture capital lawyers be doing to help venture capitalists and funds be more successful?
Making sure the VC is focusing on things that will ultimately affect his outcome – terms that directly effect return and control, and to make sure the VC isn’t focusing on things that aren’t as important which drive entrepreneurs crazy.
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5. How has “dealmaking” changed since the economic downturn began in the second half of 2008? Does it take longer to do a deal? Are you looking for different things?
It takes less time and less money to complete a deal. While the layoffs were significant, there is still plenty of capacity. Because of pricing pressures, final bills have decreased.
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6. Looking into your crystal ball, what do you see on the horizon for the IPO Market? M&A? Venture Capital Financings?
IPO – who knows. I’ve seen a lot of filing recently, but a lot of them look very weak. That smells of desperation, not an open window. I think smart VCs never plan on the IPO, rather M&A markets. M&A seems to be picking up nicely and VCs are returning to the funding ecosystem, although I’d argue those who sat on the sidelines missed some great opportunities.
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7. You’ve written about the need for more efficient “dealmaking,” with better document standardization and deal structuring. What can be improved and what role do lawyers play in that process?
Use of technology. Better use of legal secretaries. Re-engineer the bloated cost structures at large law firms so that hourly rates make some sense, as they did in the past.
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8. The ABA Business Law Spring Meeting is coming to Denver Colorado. What should we know about the emerging company and investment community in the Mountain West?
It’s vibrant and it’s growing. I was in the Silicon Valley for 10 years prior to moving here and while not the same size, there is certainly the same energy and excitement. The biggest difference is that the entrepreneurial and startup ecosystems are much more supportive of each other than anywhere else I’ve been. It is nice seeing people do well, by doing good.
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9. What are the most significant challenges on the horizon for the venture capital firms/funds in your opinion?
Government, frankly. Continued and additional regulations are hurting this industry. You can look back to SOX, but the current accounting standards are a huge drag, as well. There have been / are proposed regulations such as regulation of all VC firms (which failed) to regulations that would rescind federal preemption of securities laws throwing our business into the Wild West. Then you have further ideas such as changing the way carry is taxed.
On top of all of this regulation, you have stagnation of government not moving fast enough to rework the patent system and not allowing immigrants to start companies in this country. That is why we are part of a movement to create a new class of visa called “Startup Visa” to allow qualified immigrants to come here and start companies.
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10. Speaking of that, you and your partners at Foundry have been a strong advocate for the creation of a Startup Visa. Tell us how you got involved and why you believe it is an important issue for the venture capital community and the U.S. in general?
We have seen multiple companies that could have gotten VC funding and created US jobs leave due to the lack of an appropriate visa. It’s just stupid from every side of the equation for this to ever happen and therefore we decided that we’d take a stab at changing the landscape. There are both House and Senate Bills that have been introduced to fix this. Keep your fingers crossed.
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For more on Jason, visit his blog Mendelson’s Musings (http://www.jasonmendelson.com/) or check him out at the Foundry Group (http://www.foundrygroup.com/team/jasonMendelson.php).
