[via Fred Wilson] Startupping is a community for entrepreneurs.
Read/Write Web outlines the companies that presented at the recently concluded Proto.in. Three companies in which I have invested in were there – Novatium, Seraja and ValueFirst.
Here. All kinds of questions answered!
Doc Searls points to Giles Bowkett: “The best way to get money isn’t to find some VCs to beg, borrow, or steal from; the best way to get money is to make something people will pay for.”
Guy Kawasaki has an article by Bill Reichert:
The purpose of your pitch is to sell, not to teach. Your job is to excite, not to educate.
Pitching is about understanding what your customer (the investor) is most interested in, and developing a dialog that enables you to connect with the head, the heart, and the gut of the investor. If you want advice about pitching, you can ask a venture capitalist, but you probably wont get a very good answer. Most VCs are analytic types, and so they will give you a laundry list of topics you should cover. They wont tell you what really floats their boat, mainly because they cant articulate it in useful terms. I know it when I see it, is about the best answer youll get.
David Beisel writes about seven lessons. Among them:
“Input not consensus.” Scott K. While many have different views on management styles, I favor decision-making processes being inclusive to all parties who deserve to share their opinion, but having the ultimate decision made by a single person who is ultimately responsible for it. The problem with true consensus thinking isnt that good decisions dont come out of it, but rather that its unclear when final decisions are made. Startup situations arent the right place for muddled thinking or unclear directives. Once a decision has been made, owners of responsibility must immediately run off and execute. Although many extremely successful organizations were built on consensus-driven cultures, my opinion is that there isnt time for it in a startup – but there is absolutely time for everyones input.
Knowledge@Wharton writes about a Wharton conference:
Raffi Amit, academic director of Wharton’s Goergen Entrepreneurial Management Programs, set the tone for the discussion by noting that academic research has debunked much of the conventional wisdom about entrepreneurs.
“There’s a myth that entrepreneurs have special traits that distinguish them from other people,” he said. “But research shows no unique characteristics. There’s a myth that entrepreneurs are risk takers. But research has shown that they try to manage risk. They outsource it where they can. And there’s a myth that entrepreneurs have some sort of secret method that they can apply to venture after venture. But many second-time entrepreneurs fail.”
Robert Cringely writes that AJAX, Google, and YouTube are forcing venture capitalists to adapt.
The old model was for top firms (those run by intelligent people) to look at 800 deals per year and invest in two to six, pumping them with enough money to assure success while also killing off the founders and pushing for an early IPO and VC cash-out. The other VC firms just watched what the top firms were doing, then bought in on B or C rounds where the risks and returns were proportionally lower.
The new model is venture capital masquerading as a combination of hedge funds and investment bankers. Seed rounds are the only rounds and they are limited to angels, friends, and family. Very few companies go public and those that do are unique in their niches. Acquisition has always been the other exit strategy, but if the VCs don’t have a piece of the company being acquired, they can’t enjoy the benefits of a sale, so what’s to do? The VCs start acquiring companies, that’s what, in a classic hedge fund maneuver called a “roll-up.”
A related story on Founders Fund from San Francisco Chronicle.
VentureWoods has a nice discussion in the context of India and startups:
We are seeing more and more businesses around the theme to offer a $100 a year service to a million users. Few ideas that have got discussed here include:
1. Online DVD rentals
2. Online photo printing
3. Online tutoring (export oriented – ok more like 100k x $1000 here)
What are the views around feasibility and scale on some of these? Will these land up being more like 100k x $ 30 plans in the online context? Given that 5-10 startups are starting out at the same time, will the market fragmentation be too high?
Rick Segal writes about the ultimate VC nightmare:
An EBF happens when a founder wakes up one day and ‘flips’ into employee mode. To me, nothing is scarier then a founder saying “It’s just a job.”
This can happen for a number of reasons but the signs are pretty clear.
When you are closing a deal and the entrepreneur negotiates for his/her pay like it’s a job, that’s trouble.
If you don’t feel like you are the owner, jezz, don’t take the money; don’t close the deal. If you feel the need to fight over severance in your employment agreement and it runs 30 pages, bad start to the game. If you worry about ‘ getting fired ‘ and aren’t thinking about the business, who is right for the business, etc, etc, don’t close the deal.
Paul Kedrosky points to a post on what Sequoia Capital looks for in startups.
Fred Wilson has some suggestions:
1 – Have at least one founder on the board. Many VCs like to move the founders out of the way. They think they will be difficult and meddle. That’s always a risk, but the benefit of having founders on the board vastly outweighs any downside in my mind. Having too many founders on the board is bad too. You want a diverse set of people on your board, not any one concentrated group.
2 – Keep the number of VCs on the board to two or three. The number of VCs on the board is in inverse proportion to the success of the deal.
3 – Local board members are better. They will come to the meetings. Avoid too many board members who live elsewhere. They’ll call into the meetings. Trust me. And that sucks.
4 – Have at least one and ideally two industry insiders on the board who are independent of the founders and the VCs. They should bring operating experience. They should be mentors to the CEO. They should be local so they come to the meetings.
India Knowledge@Wharton reports on a panel I participated in recently. One of my comments:
Jain: One of the first things you need to innovate is the ability to imagine tomorrow’s world. How is the future going to be different? The entrepreneur in some ways has to live in that future world. We don’t do enough of that in India. We tend to project based on what we’re seeing today. But just looking at the impact of developments today helps you imagine the future. For example, what happens if broadband comes, what happens if the mobile data infrastructure becomes even better than it is right now with 3G networks? Then what are the new opportunities which become available?
Second, what’s required is the ability to think big. We have a large domestic market in India. What are its needs and how can one go about fulfilling these needs, rather than just looking outside India? So it’s about products and solutions for the local market.
The third thing is the ability to be prepared to fail. What would you do if you were not afraid of failure? This is very important because otherwise we tend to think very incrementally. Of course, an entrepreneur is not necessarily a person who goes out there trying just to make audacious decisions. As an entrepreneur, you’re basically going out there every day to reduce your risk of failure. But, at the same time, you need to look at disruptive innovations rather than just think incrementally. If you put all of this together, you’ll see the world very differently and new ideas will emerge.
Guy Kawasaki writes: “The world is running amok with entrepreneurs pitching every sort of Web 2.0, social networking, user-generated-content startup. Its the attack of the bull-shiitake startup projections, so Im losing my hearing; theres a ringing in my head, and I get dizzy every once in a while. Before the world implodes (again), here is a top-tenish list of ways to create realistic projections in this Dotcom 2.0 world.”