Wednesday, October 31, 2007

When Failure Is a Good Thing

QUIZ time: What percentage of dot-com start-ups have failed?" an article in Strategy + Business asks.
The answer, the three academic authors write, is probably significantly fewer than you think.
While people typically guess that 90 percent of dot-com companies failed, the reality is that a random sample of all dot-coms that received venture capital financing in 1999 showed that about half (48 percent) were still in business five years later, write Tim Laseter of the University of Virginia's business school and David Kirsch and Brent Goldfarb of the University of Maryland.
check the full article on NY Times

Tuesday, October 30, 2007

3 things to consider, that ought to help to develop a successful start-up in recession time

1) Go global.
Why? Because the weak U.S. dollar means a strong opportunity for exports, where our goods will be cheaper and therefore more competitive.
2) Go global.
Why? Because strong foreign economies--think China, India-- means a ready consumer base overseas to whom you can sell your products and services.
3) Go global.
Why? Because the strength of the U.S. economy, and our own ability to spend consumer dollars, depends upon a continued strong job market. And that depends on U.S. companies having a global presence. So, you need to have a global play to contribute to continued strength in consumer spending, as well as to be able to benefit from it. OK, so you're thinking a small startup can't necessarily afford global outposts or global operations. So when we say "go global" we mean develop your Web-based business--or the Web-strategy of your business--to cultivate a global customer base. Do anything you can to give your company global scope. Found|READ, for example, has readers from all over the world. We'll be back later with some resources for where to get angel funds, and how to give your business global scope.
Thank you, Found|Read. Very encouraging!

Great encouraging article about serial entrepreneurs

Serial entrepreneurs and today's Silicon Valley

Several days ago, Gary Rivlin of the New York Times called me about a story he was writing about the brilliant Max Levchin of Paypal and Slide, and the general topic of serial entrepreneurs in Silicon Valley. The story came out yesterday; below are the notes I prepared for my conversation with Gary.

In a nutshell, Gary's question to me was: what makes serial entrepreneurs tick? Why do people like Max keep going and start new companies when they could just park it on a beach and suck down mai tais?

follow the headline link to read the full story.

via amazing blog

Monday, October 29, 2007

how to increase mobile content penetration

CBS's ( NYSE: CBS) Mobile EVP Cyriac Roeding said that a recent trip to Korea gave him the opportunity to observe how people there consume mobile content, and in particular, how much of it. On a subway trip, he saw people using mobile TV, surfing the mobile web, paying for things with their mobile, and more. His insight on what this means for the US mobile content market: "We need more subways in the US, and that would probably solve our problems."
via Moconews

Sunday, October 28, 2007

BeyondVC Startup Cycle

NYC-based VC Ed Sim, on whether entrepreneurs should a) sell a startup on the hype of buzz, or b) double-down and build it to last. Sim's  BeyondVC Startup Cycle:

Beyond Venture Capital Startup Cycle

Sim concludes that selling at the peak of a Hype Cycle, such as we are in now, is the easier — and, therefore, possibly better — path:

1) [The] easier, less risky choice to make is [selling] at the Peak of Inflated Expectations/height of buzz…where an entrepreneur can maximize short-term value as acquirers will buy more on vision … than on business fundamentals.

2) If you decide to build for the long haul and go for the home run, it will take you a fair amount of effort and time to create the same value that acquirers will pay today; they will expect more [from] mature companies.

3) Companies that sell [at the Hype Cycle peak] may forego going big. [But] if they do not…they will have to live up to their hype in the future. As companies mature the valuation of a startup turns from pure strategic value to one where it is based more on actual revenue multiples and market comps.
via Found+Read

The $160 billion typo

Stanford student Sean Anderson was the guy who gave Larry Page the name of his search engine and company:

Sean and Larry were in their office, trying to think up a good name -- something that related to the indexing of an immense amount of data. Sean verbally suggested the word " googolplex," and Larry responded verbally with the shortened form, "googol ." Sean was seated at his computer terminal, so he executed a search of the Internet domain name registry database to see if the newly suggested name was still available for registration and use. Sean is not an infallible speller, and he made the mistake of searching for the name spelled as "," which he found to be available.
Where does Sean currently work? Microsoft.

Saturday, October 27, 2007

Quelch’s 5 Rules for Successful (global) Brands:

Via Found+Read: from Harvard Working Knowledge , marketing guru John Quelch on "How To Build a Global Brand"

1. The same positioning worldwide. (For F|R: this means in every market.) This provides a combination of functional product quality and innovation with emotional appeal. Think Coca-Cola.

2. A focus on a single product category. Think Nokia and Intel.

3. The company name is the brand name. All marketing dollars are concentrated on that one brand. Think GE and IBM. (F|R: Hewlett-Packard learned this the hard way!)

4. Access to the (global) village. Consuming the brand equals membership in a global club. Think IBM's "solutions for a small planet." (F|R says: replace "global club" with social network.)

5. Social responsibility. Consumers expect global brands to lead on corporate social responsibility, leveraging their technology to solve the world's problems. Think Nestle and clean water. (Or F|R might say: think Google.)
F|R = Found+Read.

Thursday, October 25, 2007

power of community

a deal which value Facebook at 15bn or $300 per user
Microsoft has agreed to pump $240 million into the social network in exchange for a 1.6 percent equity stake and an expanded advertising relationship. The move is a coup for Microsoft, whose advertising platform will lock down access to Facebook's 49 million members, as it battles Google's advertising business. Facebook venture capitalists, which include Accel Partners and Greylock Partners, are positioned to be the envy of the industry:  The investment gives Facebook a $15 billion valuation.

Wednesday, October 24, 2007

Bootstrap or not Bootstrap?

Few tips of Bernard Lunn on what NOT to do when you're bootstrapping. 

1. Bootstrapping is NOT self-funding. "Real bootstrappers put in peanuts of their own money [and] fund with customer revenues."

2. Bootstrapping is NOT for the "build traffic and worry about monetization later" idea. If you can't see how to generate customer revenues right away, then get external capital (VC). This why bootstrapping is usually for selling to businesses, not to consumers.

3. Do NOT bootstrap and then raise VC. "Revenues won't impact the [VC] valuation nearly as much as you think…[so] bootstrap and then sell."

4. Do NOT trade equity for services. "The better vendors won't do it (they don't need to), so you get weak vendors who drop you when they get a cash deal."

5. Do NOT bootstrap to build a prototype and get funding. "That is viable [but] do it by moonlighting, or with friends & family money. But [this] is a "self funding bridge to VC." It is not customer-funding or bootstrapping.

Obviously Bernard has specific ideas about what bootstrapping is, and is not. By his accounting, Microsoft, Oracle, SAP and eBay all bootstrapped. I'm not sure I agree: eBay took VC money. (Bernard says eBay didn't need to; therefore, still a bootstapper.) But one important thing to consider, as Bernard notes: some businesses are ideal for bootstrapping (software) others are not (media).
via Found+Read

Tuesday, October 23, 2007

Try not to be that Pete

Startup's key assets

  • The 1st most important asset remains the technology or website (including the people who build it.)
  • The 2nd most important asset is the user base
  • The 3rd most important is a startup's community

via Found | Read

Martin Varsavsky: Silicon Valley doesn´t exist

Interestingly enough, just few weeks ago while planning our anniversary trip to the US I was DESPERATELY looking for "tourist guides" to Silicon Valley... stupid and techie enough, I was running Google, Live, Yahoo and Ask with queries like "Silicon Valley tours", "what to see in Silicon Valley"... "Driving through Silicon Valley".... Guess what? - got nothing even near to what queries about "Death Valley" were yielding ....

SO: it looks that Martin is right and this pace does not exist!..... spite of anything people say .... and of how bright and smart people of Silicon Valley are! :)

... and here is the Martin Varsavsky's post on the subj:

Silicon Valley doesn´t exist (do not read this if you live in Silicon Valley)

Posted: 21 Oct 2007 03:47 PM CDT

Silicon Valley doesn´t exist. If you live in Europe as I do and you dream of going to Silicon Valley as I used to, let me warn you now, there is no such place as Silicon Valley. Before starting Fon, and having so many friends and partners in Silicon Valley including famous Silicon Valley VCs Sequoia and famous Silicon Valley tech companies eBay and Google, I thought there was actually a place that Silicon Valley as much as there is a place as New York City. But if you go to Google Maps and you input Silicon Valley you will see that no concrete location comes up. So how can so many people refer to a place that not only does not exist but that nobody really knows where it begins and ends, and frequently confuse it with a more generic "Bay Area", which also people disagree as to where it begins and ends but it seems to encompass Silicon Valley plus other undefined places. After spending a week in Silicon Valley visiting companies in Cupertino, Mountain View, friends in Los Altos Hills, and different neighborhoods of San Francisco I think that it is time somebody tells the the rest of the world what Silicon Valley is an imaginary concept and not a geography. Silicon Valley is a dream, it is a trait as in "silicon valley creativity", or a personality "silicon valley attitude", or a career "silicon valley entrepreneur". In short, Silicon Valley is a lot of things and yet none of them are an actual geography.

Monday, October 22, 2007

Time managemenet for sales & CEOs

Time management advice by Jana Eggers from SpreadShirt
for sales
"[Spend] 1/3 of your time prospecting, 1/3 of your time moving deals through the pipeline, and 1/3 of your time closing."

and for CEOs

  • 30% should be [spent on] customers+prospective customers and their use of your product with your team.
  • 25% of your time should be with customers or key partners.
  • 10% should be spent coaching and mentoring your team.
  • 10% should be with your business's numbers.
  • 25% should be spent working on tomorrow's vision and innovation… which includes recruiting and org work!

Sunday, October 21, 2007

Raise money from VC or Angels?

Should I raise money from VCs or angels, all things being equal?

There is no prototypical VC or angel. Instead of pitting VCs versus angels, consider their perceived pros and cons and choose the best available investor.

Angels are perceived to have less money, invest for fun, make their investment decisions quickly, and not ask for control. VCs are perceived to have more money, invest profesionally, make investment decisions slowly, and ask for control.

Seek a VC or angel who has follow-on capital to support companies in tough times, invests like his life depends on it, makes investment decisions quickly, and doesn't ask for control.

Companies that try to raise money from angels often end up raising money from VCs and vice versa. You can't tell where this road will take you until you start walking. Many VCs invest in seed stage companies with favorable terms—and many angels invest with onerous terms.

Finally, raise money from angels if you're hoping to sell your company quickly for $10M, with very little investment, and lots of capital gain for the founders. Most VCs are shooting for $100M+ exits. Either way, seek investors who agree with your definition of victory.

Friday, October 19, 2007

what makes you an effective manager

great summary on "7 Habits of Highly Effective Manager" from "Found+Read" blog.
Short and good summary or DOs and DONTs.

Wednesday, October 17, 2007

from Scot Rafer's lessons (found in Found + Read)

'Un-sexy' is good business.
This is a riff on a market principle Rafer picked up from a couple of his ancestors back east: one who ran Rafer's Kosher Meats; and his grandfather, who ran Rafer's Army Navy Surplus (both were in business in the 1950s, long before Rafer was born.) The idea here is that there is potential in furnishing a (seemingly) boring business that plenty of people need, but which few people want to do — a.k.a. stuff that ain't sexy. Which also means you're likely to have a reliable market for your business, and might not have so much competition — good!

Monday, October 15, 2007

Sequoia Capita: A Start-Up Check-List

List of clever advices from one of the most respected VC.
A must read

Glen Kelmann of Redfin: Build company in 10 steps

14-slide presentation on 10 steps important in setting up and building companies.
Worth taking a look

Financial model of Redfin

a real-like financial model of RedFin, an online property brocker.
Definitely worth taking a look.
Comes from Guy Kawasaki blog with comments.

The Role of an Early Stage Board of Directors

from Ask The Vc

Q: For a very early stage company (pre-funding), what role should the board of directors play?

A: (Brad). We've written about this a lot in the past. See the Board of Directors category on AsktheVC, the Board of Directors category on Feld Thoughts, and an article I wrote in the late 1990's titled Boards That Are Not Bored.

Your early stage board can cover a wide variety of roles, but fundamentally you want them to be strong advocates and support for what you are doing and what you are trying to create. They will help you with fundraising, recruiting, strategy, early founder issues, business partnerships, and a variety of other tactical things.

While there is a governance role with every board, the founders of an early stage company should not simply defer to the board. In all cases the founders should also be members of the board and collectively should view the board as a constructive group that is working together, rather than one where there are two separate entities ( e.g. "the board" and "the founders"). In addition, the "board" shouldn't be anthropomorphized (as in "the board wants me to do this") – your early stage board consists of people that each likely have a point of view, will contribute, but shouldn't "dictate."

I went back and reread Boards That Are Not Bored and continue to think it's one of the better articles I've ever written about boards. The construct of a Working Board still resonates with me, especially for a very early stage company.

These are boards that role up their sleeves and help the founders and management team of the company get the job done. They meet frequently, have animated, engaged discussions, and offer significant ongoing support and help to the key owners and managers of the company.

As a company grows and takes funding, these dynamics will change. A post funding board is different than a very early stage / pre-funding board. Both can be powerful, have huge impact (positive and negative), and are important. But – they are different.

Tuesday, October 09, 2007

intersting: flex scheduling

In his book "Creativity," Mihaly Csikszentmihalyi advises readers who want to find flow to take charge of their own schedules.

It is also possible the schedule you are following is not the best for your purposes. The best time for using your creative energies could be early in the morning or late at night. Can you carve out some time for yourself when your energy is most efficient? Can you fit sleep to your purpose, instead of the other way around?

The times when most people eat may not be the best for you. You might get hungry earlier than lunchtime and lose concentration because you feel jittery; or to perform at the top of your potential it may be best to skip lunch and have a midafternoon snack instead. There are probably best times to shop, to visit, to work, to relax for each one of us; the more we do things at the most suitable times, the more creative energy we can free up.

Most of us have never had the chance to discover which parts of the day or night are most suited to our rhythms. To regain this knowledge we have to pay attention to how well the schedule we follow fits our inner states—when we feel best eating, sleeping, working, and so forth. Once we have identified the ideal patterns, we can begin the task of changing things around so that we can do things when it is most suitable…Time is more flexible than most of us think.

Another advantage to flex scheduling: It lets you get away from the nonstop communication flow that occurs during "mainstream" hours. It's a lot easier to get things done when you're not constantly being pinged by others.

Google's video lecture on cluster computing

This submission contains video lectures and related course materials from a series of lectures that was taught to Google software engineering interns during the Summer of 2007.
Collections can be found here

Email Continues to be Misunderstood

via Techdirt
As we have noted here before, emails are very easily misinterpreted, which explains why online flame wars are infamously common. With the emergence of social neuroscience new findings have been published to further explain why emails often result in misunderstandings . Email is at a distinct disadvantage since it lacks the sensory richness of a face-to-face conversation. In a face-to-face conversation, we can judge the tone of the conversation by body language, gestures and tone of voice. So, left with only the words in an email, we are left to interpret the tone of the emails in a vacuum. But, never fear, there are ways to improve email communication. Since studies have shown that misunderstandings occur less between people who are familiar with each other, Professor Clay Shirky recommends to start communication face-to-face and then move on to email. Even saying "Hi" every morning goes a long way to facilitating the social glue. Long touted as the true "killer app" of the Internet, email has definitely improved communications -- that said, it's critical to recognize the differences of this medium and be sensitive to the challenges that it brings.

Friday, October 05, 2007

The fiction of 20%

from A VC

It’s a “given” in the venture business that in order to compensate a venture firm for all the time and energy they are going to put into a particular investment, they need to own at least 20% of the company and ideally 30%.

I hear it all the time.

“We won’t do a deal unless we can own 20%”

“This term sheet has us at 22% which is well below our target ownership of 25%”

“I can’t make a venture return owning just 15% of the business”

To which I say RUBBISH. Just because you WANT to own 20-30% of a business doesn’t mean you NEED to own 20-30% of the business.

The Flatiron program that I still manage owned about 14% of comScore when it went public. 14% of comScore is worth about $120 million today. I don’t want to get into confidential data about how much we invested and how much we took out, but I will say that it was a fantastic investment. I think that is fair compensation for the eight years I put into that investment. And let me tell you, I worked as hard on comScore as any deal I have ever worked on.

Union Square Ventures owned about 14% of TACODA when it was sold to AOL. We returned more money to our investors on that one single investment than they had invested to date in our entire fund at the time of the sale. That sounds like a venture return to me.

Those are two recent examples. But I could go on and on. I have made vastly more money on companies where our firm owned 15% than on companies where our firm owned 20% or more.

To some extent the desire to own large chunks of companies is related to the size of the funds that many venture firms manage. A $120 million position in a recently IPO'd company might not be that interesting to a fund that is managing billions of dollars of investor's capital. But it sure is interesting to me.

One of the things we are doing in the venture capital business by raising ever larger fund sizes and amassing larger pools of capital under management is creating problems and then making them the entrepreneur's problem.

And so we tell the entrepreneur that we need 20% of his or her company to solve our problem. I don't think that's right. I've said this before and I am going to say it again. The scarce resource in the venture capital business is great entrepreneurs with cutting edge ideas willing to work 100 hour weeks turning the ideas into businesses. The scarce resource is not capital and yet we are optimizing our businesses to be able to manage ever larger sums of capital.

I want to optimize our businesss to be able to back more and better entrepreneurs. And so I think its fine to start with significantly less than 20%. We often start our investments off with 10% or less and build our ownerships over time. We have one company in our portfolio where we started with about 5% ownership and are now close to 20% and if we do our job right, we will end up with close to 25%. But we earned the right to get there by investing early and often and scaling our investment with the entrepreneur's capital needs.

Don't get me wrong, I would love to own 25% of a company or more. But we don't make it a requirement. Our requirement is being able to get into the best deals, work with the best entrepreneurs, and be able to generate $40-50mm in proceeds when a deal works and return the fund, $125mm in our case, on the very best deal in the fund.

And you don't need to own 20%+ of a company to do that. I have 21 years of venture capital investment data to prove it.