When Ben and I joined Palm to run Developer Relations, we knew that we wanted to eat dogfood pretty quickly. We have had some mobile related projects in the past, but they were either mobile Web sites, or Java based. Being able to take our web skillz to rich mobile devices was much more new and exciting.

Building sample code and apps is useful for developers, and the team will be doing plenty of that (e.g. this is how you use the awesome List widget in every which way, and why you would do X, Y, or Z) but building a production app is a whole different level.

We wanted to learn what it is like for our developers to design, build, and distribute webOS applications. We could have started with a smallish app, but no :) Instead we took the great work of Justin Newitter (who built the original app) and went running with an updated Facebook app. Along with other great developers in the dev relations world, we have gotten our first early release out there today.

Here is a walk through of the app by PreCentral:

We have definitely learned a lot in our short time on the app, and this is the first release of many. I really want us to have a regular cadence to our releases. If there is a feature you are excited about let us know.

We added a broad feature set to the application. The first Facebook application was very much about synergy. Why put something in an application silo when you can bake it into the platform? I still contend that webOS is the best platform for Facebook users as it integrates throughout. Other mobile platforms do some of this, but I think we continue to do the best job here.

There are a bunch of Facebook features that our users still wanted though, so we worked with Facebook themselves to prioritize this list. The top features were access to Facebook Mail, full profile access (info, wall, and photos), people search, events and birthdays. We also wanted to do interesting things to the UI as we bring in these features. Oh, and a couple of mini-easter eggs.

Designing the application was challenging and a lot of fun. At a high level, working out a design that is true to webOS *and* a strong brand such as Facebook was a balancing act. You will run into this same issue even without a brand like FB. How does it have your DNA and still fit in with the core platform. This has been a design consideration since the dawn of time. Do you make a clean Mac app that looks like Mail.app? Do you do your own UI that looks like a funky Flash UI? Most of the time you are in the middle.

One feature that we spent time on was the base navigation. We wanted to make it incredibly easy to get to features you use often, and also quick to get to all features.

We ended up with a solution that made the following decisions:

News as Root

The root of the application is the news feed. Some Facebook apps have an icon window as the root, but we decided to behave more like the Facebook website itself. The news stream is the blood line, so start there. No matter where you go in the app, if you back gesture away…. you will always end up at the news stream.

Also, just like the iPhone app, we share the shake gesture as a way to refresh the data here. Shake away.

Status Matters

webOS devices have hardware keyboards and are great for creating content. In the Facebook context this means updating your status and uploading photos are prime ways to get your content into the system.

For this reason the top left area is your way to always get to your current status and update on it. In fact, if you are on the new stream, just start typing and the update area will pop down and capture your new status (while showing your last one below).

Also, if you click on the camera icon, you are sent into the core photo experience on the device which natively supports uploading to Facebook.

The Navigation Grid

For all other features, we wanted to give you a quick way to access them. Click on the top right grid and a pop down will immediately appear, giving you one tap access to any feature. No need to switch to a navigation screen first.

We are also playing with the ability to use that hardware keyboard by giving you quick key access to any feature (e.g. SYM + E == sends you to events). Is that a good idea?

Facebook Logo Power

The Facebook logo itself has some hidden love. In an homage to to websites, a tap on the logo takes you home…. which means back to the news stream. If you are on the news stream already, and have flicked down…. that same logo will bring you to the top.

Where to go next?

We are excited to offer access to data that Facebook users haven’t been able to get in an app before, but where do we go from here?

We definitely want to do a lot of polish on various sections that we have out there. One idea that I have been playing with from the get go is doing something immersive when you rotate the screen when in a news feed. Instead of just having the news feed work in that format, what if the content took over. I mentioned this in my last post about touch UI. I flick through the stream and if on photos, the album takes on the entire screen for example.

There are some other really fun features that revolve around webOS notifications and giving you a great way to “never miss a thing” (life moves fast you know ;) and choosing what content matters to you.

And, finally, we have to work out what makes sense in an app, and what could be baked into the platform. Giving access to birthdays is great, but would you like to have them as a calendar on the device? Maybe, but you would definitely want to be able to turn that view off…. and in fact you may already have birthday info in your profiles, so we should have one unified birthday view. Life gets more complicated when you go to the generic doesn’t it.

Again, we have just started here, but would love to hear from you on our feedback area in the app page.

Thanks to the team that played a part in this release! We haven’t reached Joe Hewitt foo yet, but we are having fun!

Have you subscribed yet to my feed on Feedburner or do you want it delivered by email?  I know that people prefer to use Twitter as their RSS feed these days but wanted to remind anybody else that you can still get the traditional feed.

I was going to save this post for a while but the “Patzer Problem” meme has forced my hand.  I, for one, am with Rob Hayes of First Round Capital on this one.

“If we are doing things right and our company founders are successful, then over the long run we should be successful. If we get to the point where our founders are successful but we can’t be, we should be rethinking our business.”

I have a philosophy.  A thesis.  An entrepreneur thesis.  I’m not talk about the age old debate amongst investors whether you back entrepreneurs, markets or products (or as many people like to hedge – product / market fit).  I’m unequivocal on that topic.  It’s entrepreneurs I back.  I’m on the record as saying I’m 70% management, 30% market.  We’ll have that debate another day, I promise.

Today’s post is about my investment thesis.  It’s what I call the “entrepreneur thesis.”  My investment philosophy is to back the best possible entrepreneurs I can and to stick by them through the growth (or sale) of the company.  I’ve outlined already what I believe makes a great entrepreneur and I’ve stated unequivocally that this is a subjective view of what it takes.  But when I’m looking to invest the dollars that my Limited Partners have entrusted my firm with I’m going with my view.

So what is this “entrepreneur thesis?”  It’s the view that I back great entrepreneurs and help them pursue their dreams no matter what.  Sometimes this will mean we collectively double down and try to build a bigger business and sometimes it may mean selling earlier than I had thought we would.  I know this sounds Polly Anna-ish.  I’m not just writing that “I love entrepreneurs” to curry favor with startup CEO’s.  Anyone who has ever worked with me knows that I’m no pushover and I’m certainly not a wallflower.  I’ll argue my point vociferously.  But I don’t believe in betting against founders.

Let me explain.

A few years ago I was having dinner with a friend of mine who works for one of the biggest known Silicon Valley firms.  He was telling me about a deal he had done.  He invested $8 million in a company in the computer networking space.  They had an offer to be acquired for $80 million, which would have dramatically changed the lives of the founders forever.  My friend blocked the deal.  It was “only” a 2.5x for him.

His logic was, “when I invested the management team knew that I wanted a multi-hundred million dollar exit so they shouldn’t be surprised.  This return won’t be enough for me to justify to my partners.”  I literally said to my friend, “You’re a dick.  Do you not see the consequences you’ve weaved?  You’ve now got a management team that hates you.  They hate you for life.  They will tell every other entrepreneur in town not to work for you.  Presumably they are talented if they created a company worth $80 million.  They’ll never work with you again.  Nor will any of their friends or colleagues.  Are you that short sighted?”

I kid you not when I use quotes there.  My wife was really uncomfortable because she was there and so was his wife.  I’ve known this guy and his wife for a LONG time.  My wife was actually mad at me for being so blunt.  But she knows it’s a character flaw of mine so she forgives me (I hope).

To this day I still don’t understand what he was thinking.

I’ve had the conversation of what will happen upon an exit with founders so many times I feel like a broken record.  Before I outline my views let me give you one more story.

In 2006, Steven Dietz, a partner at my firm, GRP Partners, had given me $500,000 in a seed in convertible debt when I started my second company, Koral.  GRP Partners had also funded my first company.  I had an offer to sell my company to Salesforce.com in 2007.  Steven knew that from a fund perspective he wasn’t going to earn the amount of money that a typical VC might look for since we were selling early.  But he also knew that it would change my life forever.  He was grateful since I stuck with my first company, BuildOnline, well beyond when others would have (since I had taken great dilution during the dot com bust.).  He decided to let me earn.  I will never forget that.

So it was kind of obvious when Steven and Yves Sisteron (the partner on my first deal) offered me a role as a partner in their firm that I would work here.  I knew that we were aligned intellectually and ethically.  I had initially called them wondering if they’d fund my third venture.  I never imagined I would switch sides of the table.

So, to my thesis:

1. Work with the best at early stages: I’d like to get involved with capital efficient companies early in their lifecycle.  I want to back entrepreneurs that I believe have similar ethical values, are fun to work with, trust me, have big aspirations, are willing to work hard, are smart and want to have an impact on the world.  I want to see small amounts of money go in and I often tell these entrepreneurs, “I don’t have a goal for you to come back and quickly ask for more money.  Go slowly if you need.  Spend wisely – you need to “grow into your valuation.”  And by investing smaller amounts at early stages I am impacted if a quicker-than-anticipated sale happens.  I view this as The Patzer Opportunity.

2. Go in planning for a big outcome: I tell each person that I am going to work with the same story.  I hope to build a billion dollar company with them.   GRP Partners has created more than a dozen of these so as a firm we know something about creating big companies.  I don’t go into deals with a plan to sell for $20 million.  $100 million at least.

3. Keep options on the table: I believe in my bones that entrepreneurs shouldn’t “over raise” capital.  They should right size their capital raises.  That doesn’t mean being cheap.  That doesn’t mean raising the least amount possible.  But it means not over raising money.  I know I’m being vague.  Each situation warrants different amounts.  But let me give you an example.  If you can raise $2 million or $10 million up front (maybe you’re a hot entrepreneur in a hot space) I know that my vote would be with the $2 million (again depending on the situation).  If you raise $2 million you preserve your options.  Somebody may come along and offer you $25 million to buy your company.  You might like to accept that.  It might just change your life (for example if you personally own 33% of the company).  Or if you didn’t sell and the next round comes along.  You raise $5 million at a $20 million post money.  That by definition means you were hot.  You should still be able to sell for $50 million.  At each step you preserve your options.  If you go to quickly to take down a $50 million round from late stage funds you have one option – go big or go home.

4. Don’t block founders from selling: OK, so if you raise $2 million at a $10 million post money (e.g. maybe I own 20% of the company) or $5 million at a $20 million post (I own 25%) shouldn’t I block that sale of a company a cheap price?  This is the “Patzer Problem.”  Some people assert that the later stage investors didn’t make a high enough return.  My view: If you’re absolutely convinced that it is the right thing to sell I need to support you.  My bet: if you sell and I helped you earn and was a key contributor to your company then you’ll tell everybody you know to work with me.  Over time I should see great deals as a result.  When you go to do your next company (most entrepreneurs do) you’ll call me first in the way that I called GRP Partners for both my second company and my third (which never materialized).

5. Persuade you and align you to swing for the fences with me: But of course there is more to my views.  I’m hoping that when your $25 million or $50 million exit comes along I can convince you (if I believe it) that we should swing for the fences and create a larger company.  If I really believe it I ought to let you earn now by taking money off of the table.  I have already written about this.  I believe our incentives need to be aligned at this point in time.  You need to have your “feed the family” money so that you want to swing for the fences.  You also need to believe that the higher outcome is possible.  If I’m not willing to let you take money off of the table and if I’m not willing to put more money into the company to help you achieve your goals then how convinced am I really about the upside?

I’m not trying to be nice to entrepreneurs so you’ll read my blog or take my money.  It is simply the thesis that I believe in.  It’s the “entrepreneur thesis.”  Let me outline the contra viewpoint, which is seldom expressed openly, but it what I believe gives our industry a bad reputation.

• Large early stage rounds – Too many investors whose funds are too large feel that they need to put “a lot of capital to work” in order to justify being involved with your company.  So much so, that when I was raising capital in 2006 and asked for $2 million several funds told me that they wouldn’t give me money unless I’d take $5 million.  And they actually hinted that I could get a better valuation.  Tempting.  The problem is that it takes options off of the table.   And the same logic that forced them to put $5 million to work also forces them to block your sale at prices that might just change your life.

• Change management teams – A lot of well known, historical VCs have a belief that management teams are expendable.  You simply bring in a more talented team after your $10 million investors and the founders become senior members of the team but don’t run things.  I accept that this may sometimes happen.  But it’s the absolute last course of action for me.  I believe that a motivated founder trumps a well-hired mercenary CEO any day of the week.

• Outsized returns through sharp elbows – OK, here is what it boils down to.  I really believe that some firms have the strategy of edging out the entrepreneurs, bringing in a new management team, recapitalizing the company, minimizing the founders’ share and taking maximum ownership for the VCs.  This is dreadful behavior but I truly believe that some firms go into investments with this mindset.  I’ve heard very similar stories in the VC corridors.  ”Well, we’ll just do their next round and take 50% of the company.  They’re struggling to raise funds anyways.”  Look – it does happen.  And sometimes it is warranted.  I just don’t believe that any VC should go in with this strategy.  It’s why I always tell entrepreneurs to reference check their VCs.

Listen, who you work with matters.  Brand isn’t everything.  And firms that get outsized returns on occasion to so at the expense of the founders.  My thesis is that I should align myself with my customers (the CEOs) as it is the most likely path to great financial returns for my investors.  And if I’m in this business for a long time I’m betting this will pay off.  You?  Taking VC money is more difficult than marriage.  At least if you fall out of love you can legally get divorced in America.  Not so venture capital.  Raise wisely.

Update: After reading the comments I want to make one thing clear.  I don’t believe this strategy has any sacrifices – I believe it will mathematically pay off bigger over time. Why?

- getting invited to be in the handful of deals each year in the US that really matter vs. getting mediocre deals
- getting the best entrepreneurs to work with you multiple times
- finding the right balance where sometimes the “early sale” doesn’t happen because you allowed some founder liquidity (on a case-by-case basis) that enabled you to swing for the fences where other entrepreneurs may have pushed for an early exit when incentives weren’t aligned

*photo taken from the Mint.com blog