TechGain

Pastures new...

2012-04-17T21:25:00.000+01:00

This is just a brief post to let anyone who looks at this blog that I've been lured away to the other side (dark side? light side?) and am now working as CEO for Tangentix helping them bring their exciting technology through to market. I remain good friends with EV and the great people there and continue to work as their representative non-exec director on the board of EoSemi too.

Product/Company Name/Domain Generator

2012-01-29T21:13:00.000+00:00

Why build it?

I've spent far too much time watching teams struggle with how to name their products- it's something that seems easy but is actually fraught with problems so some time ago I set up a checklist of the 8 things I thought you should check. The worst of these is often the domain name- most good ones have gone- so here is really simple tool to produce a bunch of suggestions quickly that can go straight into a domain name bulk service for checking.

How to use it

To use this tool simply start tying lots of "First bits" (based on known words, sounds letter patterns or adjectives), and lots of endings you like in the second. The page will constantly update the third output column with a list of candidates you can then use to copy and paste into a domain name service like this one.

Nothing is stored so do keep the lists you make by copying and pasting them somewhere on your own computer.


First bits	Second bits	Output

New Venture Capital Jobs at EV

2010-01-06T18:55:00.002+00:00

EV – EMPLOYMENT OPPORTUNITIES

EV has recently been awarded several mandates for new funds, bringing funds under management to c. £85 million with the capacity to invest up to £2 million in SMEs located across the UK. As a result, three new positions have arisen within its existing EV Tech team; an Investment Director and an Investment Manager are now required to cover the North West and Yorkshire regions, as well as a Fund Administrator to be based in the Yorkshire region.

INVESTMENT DIRECTOR

Candidates for the Investment Director role will have previously worked for a technology VC house and will have an investment track record. They are likely to have a science-based first degree and MBA and/or ACA qualification as well as being FSA Threshold Competent. The role will largely be based at EV’s Manchester office.

INVESTMENT MANAGER

Candidates for the Investment Manager role will have a science-based first degree and could have a background in technology transfer, corporate finance, technology analysis or previous spinout company experience. Experience in working on medical products/ innovations would be advantageous. This is an entry level role into technology VC investing and will be based in the Yorkshire region. In both cases, applicants must have the following key attributes:-

Financially and technically competent
Commercially aware with a sound level of judgment
Sound project management skills
Proven analytical and problem solving abilities
Able to manage duties with some guidance and/or technical assistance from Fund Manager
An effective networker able to positively promote EV and its fund under management and build a strong contact base with regional intermediaries and deal referrers
A sound communicator, both written and verbally
Able to build good relationships with investees, clients and contacts
Energy, enthusiasm and a keen interest in the early stage technology space

FUND ADMINISTRATOR

The Fund Administrator will provide support to the EV Tech investment team in all areas of financial management and control, in particular, to ensure the efficient planning and execution of day-to-day administrative functions of the investment team within the business. The role will involve collection of data, maintaining of databases, report writing and basic accountancy/ fund management work. Candidates must have strong Excel modelling skills and ideally have an accountancy qualification. Relevant experience in the financial services sector is not a requirement but would be useful. The role will be Yorkshire-based. This is an outstanding opportunity to join a growing and independent specialist fund manager. Attractive package including benefits

RisingStars Portfolio Seminar

2009-06-30T10:39:00.019+01:00

I really enjoy the RisingStars Portfolio Seminars: it's always great to see gathered together the portfolio company directors and to see the value they get from talking to each other. Jonathan opened proceedings pointing out that there are differences between some of the doom-and-gloom in the current Private Equity market compared to some of the solid progress recently in the RisingStars portfolio. In particular pointing out that the increase in valuations for RSGF1 over the last 6 months is unusual in the market. Second up was Julie Meyer, famous for founding First Tuesday, and now CEO of Ariadne Capital spoke about entrepreneurs with some really interesting quotes. Some key trends she highlighted included:

A move to smaller A-rounds due to the lower cost of getting started- e.g. £1m.
Changes in the way early-stage companies align to their ecosystem. In particular startups are taking advantage of "largeco's" inability to take advantage of the changes from social networking generally.
There are categories left to be built- not all done
Speed of innovation becoming ever more important

On market entry Julie pointed to Spinvox as pioneering an increasingly important approach. She described the way that they had engaged directly with consumers, building 100,000 users, before then engaging seriously with the mobile operators. A particular observation that resonated with me was about exits, where, despite the general downturn in deals, she sees that "M&A is the new R&D". That where many larger companies have been decreasing in-house R&D, they are now looking to get a faster competitive advantage by looking at acquisition of technology companies as a potential solution. An idea that was new to me entirely, was to wrap up the ideas of increasing consumer power, citizen participation, individual entrepreneurship can be wrapped up in an idea of "Individual Capitalism". She suggested that this had some implications for the need for companies to think a little differently about their key employees. She described the audience as "Super-glossy VC backed stars"- um! Finally, Julie highlighted some of their recent work. In particular:

bview as their local directory play
gnuTrade- a blend of gaming and financial market trading
Monetise, a mobile payment play.
Near, virtual world retail.
Qire, a Liverpool based enterprise voice messaging play
SliceThePie, an unsigned artist music site.

Julian Viggars, our Head of Technology opened up by cheering us up with some economic facts of life- thanks Julian! But within the data were some interesting gems:

UK companies are cheap to acquire at the momement due to the exchange rate
Tech acquisitions have dropped less than others (17%)

Whilst last seminar we were largely speculating over the effect of the market changes on our portfolio, Julian observed that we'd seen some of those effects come through in practice. In particular, the increasing importance of cash, on extending cash runway, and on making solid product progress had been anticipated and were now observed. Julian provided some detailed numbers on the fund progress, which obviously are private so can't be repeated here, suffice it to say that it was great to see the collected progress in terms of fund-raising and commercial traction for the portfolio generally. Julian showed his conviction in believing that now was a good time to invest in technology companies. Some years ago, Alison Kibble the CEO of Femeda, introduced what was then an early-stage investment, so it was great for her to come back and explain the progress that the company had made with their disposable home treatment for one of the most prevalent medical conditions; female urinary incontinence. She was able to report a staggeringly positive response to their medical trial, although I wouldn't have minded if she'd found a better example of the support she's had from investors than posting adverts for the trial in our office toilets! She was able to illustrate well the way in which the large FMCG companies are interested in the way that Femeda, and companies that ilk, can move much faster towards new products being on the market, and hinted at the potential for a corporate transaction to take the product to a global market. Finally, Alison finished up by describing the desperate stories from the comments on the company's blog which illustrated just how far the product can go to improve people's lives. Ben Hookway is one of our "serial entrepreneurs". He provided some war stories from NextDevice, the issues they faced with selling their mobile UI software company into the handset value chain. In particular the difficulties of taking the decision to sell at that time. He pointed out how important some key aspects of the exit process had been:

It's vital to have clearly documented any reliance and usage of opensource code.
Mentor had purchased as a third option, after playing with software deal, or investment.
Ben admitted to being a bit seduced by the earn-out on the table from the acquisitor. Although as part was pre-paid it worked out OK, he'd be much more wary another time.
Ben counselled to watch for the way the options appear to narrow as the deal proceeds. The people he had to deal with changed and increasingly it can become the only deal in town- very tense. One way of mitigating this Ben suggested was vital was to make friends with the person tasked to do the deal on the corporate acquisition team, don't rely on your existing internal champion.
It felt like they were approaching a finish-line, but "you gotta take a holiday" because this is the start of an intense process of trying to make the product work for the corporate. You find out just how un-bought-in the vast bulk of the company is going to be- they've not been involved. It's political and tough to get things moving in the largeco. It took 3 months to get a part number, without which the sales guys couldn't actually get any of the sales people to work on it.
Ben provided plentiful advice on how to deal with some of the internal politics- expectations you have no knowledge about have been set internally- "a tough world".
Finally, with a knowing grin, Ben advised not to try and change the company culture to be more like the start-up. You've got to embrace the experience. He's really enjoyed it, but now...

Ben described his next role, as CEO of Vidiactive- more of this later... In the question and answer session, Stuart McKnight observed the gradual return of some of the top tier investors during Q2 who had been quiet in Q1. Julian responded that we've seen an increased level of interest, but still a little shaky and uncertain. Jonathan observed that he'd seen an institutional realisation that technology had been a bit neglected in the rush to increase Private Equity funding. "Attitudes have changed", he observed.

First,ten BUT...

2009-04-03T06:28:00.004+01:00

Seth Godin's latest post "First, ten" highlights a classic start-up mistake, but for me misses an important step.
He suggests that you find ten people to use your service who "trust you/respect you/need you/listen to you...", that, " if they love it, you win. If they love it, they'll each find you ten more people (or a hundred or a thousand or, perhaps, just three). Repeat."
Seth Godin makes a key point here which we've seen many start-ups, large and small, all miss: if you require that your business grows virally, then all that spend on launch and PR is wasted if you do so when the product is not yet good enough to be viral by itself. That's not to say that PR etc. can't be great when you want to pour some petrol on that fire, but you're better saving up that fuel for when the fire is already spreading by itself.
However, I'd have to suggest some qualifiers. The test is not those "first ten", but whether those first ten start to "spread the virus" by themselves. That might well mean that they need to be considerably more than ten so that you can measure and understand them, but it certainly doesn't have to be ten thousand. Key to that viral spread is the communication from an existing user to a new one, and that's a tough barrier because the user chooses it, not you (how many different ways have you heard Twitter described?). My view is that Seth Godin's definition of the "first ten" might prove a little unrepresentative- they're clearly going to listen, and therefore give you the chance to communicate much more sophisticated and subtle ideas, you can "teach" new things, or even "un-teach" perceived wisdom. You could also get those first ten to think about what the service could mean to their lives and how they might use it, and it will be much more memorable. So I would suggest that the "first ten" test is necessary but not sufficient.
My suggestion, based on our portfolio, would be to aim for a larger group of people, grown gradually, and iterate the product, messaging and experience to the point that you start to see that demand is spreading "all by itself". Then go and get the petrol can!

Guardian interview with Mike Wheatley CEO of Ensembli at SxSW

2009-03-23T12:08:00.002+00:00

Jemima Kiss' inteview with Mike explaining Ensembli:

SXSWiMichaelWheatley16Mar2009 by jemimakiss

A business plan checklist for VC funding

2009-03-23T10:58:00.003+00:00

This post will doubtless expand as people make suggestions, but I have meant for some time to get round to posting a checklist I can refer people to look over.

Checked	Item
	Have you removed as many superlatives as possible and replaced them with numbers/facts (e.g. changing "Joe has been a leader in user-interaction design for many years" with "Joe has lead user-interaction design projects for BigCorp, and SmallHouse for 10 years and produced the interaction for the WebThingy service used by 200,000 people a month.")
	How would your customer describe the problem that your service/product solves?
	How do your customers solve that problem now, and how will they solve it in the future without you?
	What do your customers pay to solve that problem today, what will they pay for your solution?
	How will you to teach each of your customers about your solution to the point they will buy and how much will that cost (don't forget to allow for those that never get round to ordering/paying)?
	How will your competitors react to your early success? How much will it cost them and how long will it take them to catch up?
	How long has it taken other companies entering this space to build up customers?
	Have you identified a clear route to market, is there a beachhead market segment you have in mind, in what way is this different from the mainstream?
	What more must be done, what will it cost, and how long will it take before the product/service is ready to generate revenue?
	What have the team done before (illustrated with numbers where possible)?
	What other businesses have made good money and/or exits working in the same problem space? What steps have you taken to learn from the people who did that?

Please suggest some more!

Ensembli launch at Demo

2009-03-16T08:13:00.003+00:00

We now have the proper video of Ensembli's launch at Demo. They've had great feedback and I'm delighted with progress (although there's always lots more to do!). Well Done Mike, Ian and everyone behind the scenes.

Portfolio company Ensembli launches today

2009-03-03T10:34:00.003+00:00

I'm delighted with the early reception for Ensembli's launch- the team are out at Demo at the moment. Ensembli provide an equivalent for RSS for people who are a little more time-poor and a little less technically savvy. Ensembli's beta is open now here. You can find out more about the company and its funding here.. If you're on the web at 16:40 GMT today you can watch it live here: http://www.demo.com/live. Good luck Mike and Ian!

An 11th Reason why startups fail

2009-02-24T10:12:00.003+00:00

Tim Draper the legendary (Rhino riding!) founder of DJF has an excellent blog post on the reasons startups fail. I'd like to suggest an 11th reason though, which we see frequently:
"The average cost of selling is too high."
In particular, we see many companies where the need to communicate complicated messages, over a succession of meetings, and maybe customer trials too, is itself expensive. This is then compounded because the proportion of those customers that convert is not too great, and they take a long time to decide to start paying. Finally when a proportion place orders it doesn't cover the cost of all that customer engagement.
It's a shame that 11 reasons isn't such a tidy number!

Founder Dilution - How Much Is "Normal"?

2009-02-21T16:14:00.003+00:00

Fred Wilson has a post up urging entrepreneurs to record their dilution at exit in a survey being done by Simeon Simeonov. Please can I urge anyone reading this who has experience of exiting to take part. My experience of exits would suggest that Fred's experience is typical when he suggests that: "it will generally take three to four rounds of equity capital to finance the business and 20-25% of the company to recruit and retain a management team. That will typically leave the founder/founder team with 10-20% of the business when it's all said and done."

Founders wanted to help founders

2009-02-19T16:09:00.002+00:00

Every now and then we come across founders who are rather sore. They started a business with a partner and shared the equity 50:50 using an off-the-shelf company only to find that things didn't work out (see the post on Boomerang Founder). We thought we might commission some standard legal docs which we could then give away to anyone starting a business which might set things up a little more fairly. Obviously people would be wise to take legal advice, but often they don't at that stage. What I'd really like to find is some people willing to be quoted on an announcement about these legals to explain their experiences of falling out with founders and why they'd want to use something more robust another time. If you know anyone who fits the bill perhaps you'd ask them to get in touch.

Why we don’t sign Confidentiality Agreements

2009-02-19T10:37:00.005+00:00

As a rule we don’t sign confidentiality agreements (CDA’s). As it’s something that comes up regularly with new funding applicants, I wanted to make this reference post on why we don’t sign them:

We get asked to sign hundreds of them a year. It isn’t practical to be party to so very many contracts just in order to find out what a company has in mind.
Managing the commitments would be a due-diligence and compliance nightmare- imagine being asked to “check” the legal status of hundreds of CDA’s, never mind the time negotiating and signing them up.
We’re looking to back companies which can build protectable positions. In our view a business idea can’t be protected and expecting to do so is probably unwise. That protection could be patents, or could be customer relationships the company will build, it could be a database, or designs, knowhow or copyright. However, without any such protection we couldn’t expect to sell our interest in the investee at the end of the investment life. So if a CDA is needed to protect the idea, we probably wouldn’t back it anyway.
Our experience has been that, the more closed and nervous the management team is about their idea, the less unique and special that idea is in practice. When we did sign CDA’s at the start of the fund life we found that where the team was most insistent was exactly when there was least to be protected.
We commonly see the same idea repeated many times, despite the management’s insistence that they are uniquely pursuing the opportunity (after all if they are in “stealth mode” then it follows that their competitors may be too!). We don’t want to have to defend ourselves against an aggrieved founder who thinks we broke a CDA when in reality we just backed someone else with the same idea.
Although advisors will often suggest that you need a CDA to protect the patentability of a technology, on a first meeting we may well not need to know “how” the idea is achieved, merely to understand “what” it achieves. If the step from “what” to “how” is obvious then it is not, by definition, patentable. Even if a company chooses to disclose to us, I would be stunned if a direct private disclosure to a professional FSA Authorised fund manager could ever count as a “disclosure” for the purposes of prior-art.

We are therefore confident that, despite having the “no CDA” rule for more than four years, we haven’t missed anything significant because founders couldn’t get comfortable with our reasoning, after all I’m not sure any US VC’s now sign CDAs routinely. At the end of the day we DO sign a confidentiality clause as part of any term sheet we issue. We also sign a slight variant of the BVCA standard CDA “IF AND ONLY IF” we are looking at a more detailed technical disclosures around second meeting stage. However, this is always our BVCA type agreement which you can find here. Update Mark Peter Davies puts a related post on his blog that's worth reading.

The Boomerang Founder: read this before founding a company

2009-01-19T20:54:00.005+00:00

David Cohen, and entrepreneur investor and technologist from Colorado has a post on his blog about the perils of co-founder relationships. I would recommend that anyone contemplating forming a company takes a look not just at the article, but equally at the comments of the people on his blog. It describes a problem very well that we see in a significant proportion of the companies that come to us for funding.

An Investor view of Intellectual Property

2008-11-20T07:24:00.004+00:00

An Investor's view of Intellectual Property

View SlideShare presentation or Upload your own. (tags: venturecapital licence)

A short presentation I gave last night to a business audience at Creative Lancashire.
Here is a list of relevant links I provided for the audience.

How "recession-proof" is your business?

2008-11-12T11:00:00.003+00:00

The most popular boast now from entrepreneurs seeking funding is that their business is, to some degree, "recession proof". Whilst it will be some time before we know the magnitude and implications of the economic situation, we can attempt to help our portfolio companies understand how vulnerable they may be. Fred Wilson had an excellent post on the strength of his portfolio using something he dubbed The Survival Matrix. I thought I'd extend this a little by putting together a kind of recession-proofness-test that draws in some of the other issues. Please take the precise numbers with a big "pinch of salt": I am not planning on defending any of the weightings or rankings. I'd welcome any debate about what's included, but my purpose is to highlight issues and help give people a feel for where they stand. When I tried this test on a few portfolio companies it certainly showed a wide disparity. At the lowest 45 points and the highest 109 points out of a theoretical maximum of around 220. My view is that companies upto perhaps 50/60 points really need to think hard and urgently about making what might be quite big departures from plan. Whereas around "100 points" perhaps a slightly more considered view makes more sense even if the actions taken are still pretty firm. I can't imagine many VC-backed companies will get anywhere close to 200! I hope this test helps a little for companies to focus on just how much and how urgently their plans need to adapt. I'm doing a presentation around this stuff at our portfolio seminar this morning which I'll post up too. You can find the calculator here.

RisingStars Portfolio Seminar- A constructive look at technology companies in the recession

2008-11-12T10:25:00.024+00:00

Jonathan Diggines our CEO opened the event with a view of the state of the economy generally: hard to make this part positive looking, but Jonathan pointed out that there's no reason to think that tech sector will be worse effected, and some reason to think it might be better than most. Julian Viggars looked then at our portfolio in more detail, and about technology generally. It was great to hear a summary of some of the great progress in terms of further fundraising and commercial progress drawn together. He produced some interesting comments from some of the top-tier tech companies: Cisco, SAP, Google. The key thing was a big disparity between how different sectors saw the outlook. Stuart McKnight, the Managing Director of Ascendant Corporate Finance, after the obligatory quick plug, provided lots of current data on the state of the tech financing market. With 282 live technology investors who did deals in 2007 over £0.5m last year. With 2/3rds of deals being 2nd round or later, then that left only 78 first rounds above £0.5m. By the end of Q3 2008 it looked like the rate of capital investment was slightly faster than 2007, with very little sign of any negative change in the first 3 quarters of the year at least. Stuart's view is that the Limited Partnership structure means that is still plenty of reason for funds to keep on investing. Reckons the market will be at around £900m in 2009- up a bit from the current rate, with a continued rise in "cleantech" as a sector through that period with several new funds having closed. He said lovely things about Acal and their team, which is nice, but observed that the fundraising had been more challenging that anticipated because so many of these new funds are late stage and there's a gap beneath this level. Stuart was concerned that there was a shift away from small scale investing, with a drop in the proportion of deals in the £200k-£1m range. He thinks that companies are finding seed funding, but hitting a gap at the first proper VC round. He speculated that maybe the recession will push some of the VC's to decrease deal size, pushing down total value faster than volume. Looking at regional patterns, I was surprised that the Thames valley, including Oxford, was a really small area, less than half that of the Northern region. So far London is the only region where volume and value have started to show a downturn. Stuart thinks that 2009 will be strongly indicated by the impact on Q4 2008. He knows of four funds that have said they have no intention of investing in the quarter, claiming that they want to hang on to cash to support portfolio. Stuart summed up with a great set of conclusions- more and better of the usual good stuff likely to be required by companies seeking finance. He sees that the best stuff will still raise money, but that you need to expect everything to be a bit slower and tighter in the next 12 months. You need to expect to double the work on fundraising- maybe 40-50 VC's approached, 20 or so first meetings, and spreading your net wider than might once have been required. Richard Young told the seminar about his experiences of the last recession, and reflected on how one of our companies, Blue Prism, is adapting to the new reality in Enterprise Software by adapting their customer messaging and propositions. They are conserving cash and looking to exploit their fast ROI as a differentiation in a cost-orientated market. I liked Richard's comments that in the last recession, "it was noticeable that you knew when it was over because it was when people stopped talking about when it would end"! My turn next, and I covered the stuff in my last post about how to think about the scale and rapidity with which early-stage companies should be reacting. If you have a look at that post there's a calculator where you can work out just how vulnerable your company might be. We finished off with a lively debate on the impact and reactions that tech companies will feel over the next year.

Silicon Valley Goes Dry? effects of the credit crunch on VC funding

2008-10-04T11:13:00.007+01:00

Redherring trumpets that "Silicon Valley Goes Dry", in yet another report trying to figure out the impact of the current financial malaise on technology VC. So far, I've come across all sorts of tales of doom, and in the RedHerring report the lack of M&A exits and IPOs (in part due to the lack of bank leverage) is cited as hitting exits- which in the next few months must be inevitable. It then goes on to suggest that "...the collapse of IPO and M&A markets mean they [VC funds] won’t be repaid as quickly. That means VCs won’t have funding to finance new companies or to add follow-on rounds for current companies". Erm, not exactly. Whilst lack of exits may hit some fund returns, if their timing is unfortunate particularly, VCs are normally not allowed to re-invest the returns from their exits. That means that VCs who have raised funds should still have the committed monies to invest from for some time. However, the other side of this coin is that VC funds do usually rely on their investors providing the cash in drawdowns to the funds as required. Normally as the fund's investors are financially solid, and once committed they are contractually obliged to follow-through, there is no financial risk to the fund itself. However, if any of the fund's backers fall, then that backer would be unable to meet its obligations. Should that happen then the fund's constitution often allows the other investors to choose to hang-on to their cash. That MAY mean that a small proportion of financial institutions falling, could cause some funds to "shut up shop" entirely. It's too early to say if this will happen much, but Venture beat certainly cast some doubt on at least one fund. Fortunately, none of our backers appears in any way effected, but it does show how hard it will be for any of us to anticipate exactly how this crisis will play through to technology businesses. Perhaps venture-backed businesses should start asking some questions of their VCs! Thanks to Anders.B for the image.

Survey on Corporate Finance Advice

2008-10-03T07:42:00.004+01:00

I was curious to see what the aggregated view of the portfolio companies was on Corporate Finance advice. So I asked our portfolio companies to give us some feedback which I've summarised below. Any comments would be very welcome!

Choosing an Entry Market Sector

2008-09-22T14:47:00.002+01:00

A common issue I see with early-stage companies is over their selection of entry market sector. Obviously, all investors love their portfolio companies to have a huge vision to change large markets in a big way, and on occasion the best way to plan to reach that is to go straight to the big opportunity head-on. However, often that's going to be slow and hard, perhaps credibility is crucial, in which case it's really helpful to find a launch "beach-head" in the lines advocated by "Crossing The Chasm".
So where companies have chosen to use a beach-head, the next question is which one? If you just pick the "largest sector", or the one you're "most familiar with, you face a danger- the best entry sector is not always the obvious one. I think there's a different set of thinking about launch markets, where you highlight a slightly different set of factors as important.

Criterion	Ultimate market	Launch market
Scale	Ideally as large as possible	Manageable, but low priority in selection process
Differentiation of offering against competition	Important	Critical
Focus on customer problems	Can be more general- boxed product is easier to scale	May be helpful to have solution type sales initially
Unit sale	Very large or small is good- scalability is crucial	Ideally ~1 months burn- large enough to be useful, but small enough to avoid lengthy approvals
Mission criticality	Mission critical to the customer provides extra value	Ideally not too critical- hard to buy from a startup
Length of buy cycle	May be long	Short is incredibly helpful
Easy customer identification	Useful	Vital

I bet there are some great suggestions for improvements to this table- please let me know!

Plan B for Fundraising

2008-09-10T07:34:00.002+01:00

Guy Kawasaki has an interesting post comparing the merits of bootstrapping vs. early VC backing which is well worth reading. He nicely positions bootstrapping as a Plan B, and certainly makes it appear quite an attractive option. My own take would be:

	Outcome
	Product Sells	Product Doesn't Sell
Venture Backed	You exit and have to share some of the rewards* with the VCs	The company fails and everyone is unhappy.
Bootstrapped	You exit, but probably only after raising some money to give yourself strategic options and thereby boost the price.	The company fails and everyone is unhappy.

(* in our experience ventures that have insufficient capital to have other strategic options get sold for a lower price, so maybe the rewards would not be so different too.) So my advice would be to understand the future for your business and really decide if VC money changes the potential outcome in a good way. If it doesn't then don't take the money just to give yourself a salary along the way!

Technology Recruitment in an Early Startup

2008-09-05T22:15:00.003+01:00

Daniel Tenner has a great post that is good reading for people looking to build early tech startups. I would just caveat his comments by suggesting that care is needed in understanding how you provide equity to those who help you out in those early steps. Daniel is completely right to suggest:

"You want them to feel that it’s their company, and to do that, you have to give them equity - not options, not promises of options, but actual founder’s equity. Don’t feel like you’re giving stuff away here. If you’ve got the right person for the job, ensuring that they feel ownership of the company will ensure that your share is worth something. It’s better to own 70 or 80 or even 51% of something than 100% of nothing."

However, bear in mind that there are two categories of people you might want to help out with a startup- and both can contribute a great deal

Ideal hires- people who you would've hired to do the job at the full commercial rate if only you had the cash, and who you'd expect to continue to be perfect for the job in 3-12 months time.
Opportunistic hires- people who are prepared to get involved early, before an ideal candidate would join, but who are probably not long-term management or key staff.

I would suggest that it is wise to think this through, and to talk it through openly with those involved, and make sure that the equity is allocated appropriately. I have seen many many founders who regretted having shared the company, often 50:50, with someone who ceased to be involved pretty quickly. I've seen founders who've been sweating to make the business work five years from the start, whilst their co-founder holds similar equity and has long since departed. Needless to say these founders tend to regret their decisions!

A global view of social networking

2008-04-04T20:41:00.002+01:00

| View | Upload your own

Tim Langley pointed me to this intersting presentation.

The Collaboration Cycle

2008-03-18T12:13:00.001+00:00

The Collaboration Cycle
Originally uploaded by Edward French

Three months into licensing or pursuing a market entry for a new technology everyone involved always feels like they're a few months away from a deal, and no more than a year from revenue. Time and time again we've found it always takes much longer. You can expect to see at least one change in the bigco's team, and if it's an international collaboration each cycle of meetings takes months. This graph tries to compile the wisdom from all our companies licensing and collaboration projects- the conclusion being that, even without any hiccups, it's likely to take around 3 years from first meeting to revenue. This is a real opportunity, in my view, for the largeco's to steal a march on their competitors- getting really quick and sharp about technology acquisition would buy them a great advantage.

Rahns law of investment propositions

2008-03-17T20:01:00.004+00:00

Mark Rahn, the newest member of our technology team, is doing a great job and took to the job like a "duck to water". He came up with a real gem of an observation the other day, which I've taken the liberty of christening, "Rahn's Law".

"The quality of a proposition is inversely proportional to the amount of time the plan or team spends extoling its virtues."

In other words, propositions that tell you repeatedly how exciting the sector is, how transforming their stuff will be, that wax lyrical about the great qualities of the people are often compensating for the weakness of the product, opportunity or team. The very best plans are short, factual, and rely on evidence rather than weight of self-praise.
This links nicely to four tests for any business plan which I've always urged our investees employ:

Four tests for business plans

1. The superlative test

Have you obliterated all superlatives? Leave it to the judgement of the reader if something is really "exciting","superb", let alone is someone's track record is one of "success".

2. Have you used facts/numbers wherever you can?

It's a good discipline to try and replace each superlative with a number or fact instead: it makes writing much punchier! Don't say there's a "multi-billion dollar market for mobile software", try and say something like "there's a £n million market for GPS software on mobile devices". It's a great deal harder to write this stuff, but it helps convey real market knowledge and understanding.

3. Check that jargon is appropriate/necessary

If I was writing a plan associated with "WiMax", the I probably need to refer to "WiMax"; that's appropriate use of jargon. However, it doesn would a proposition really benefit from using "ARPU" when you're not talking about anything that's not encapsulated by the word "revenue".

4. Can a non-specialist reader tell what the company provides?

Include a laymans explanation of what your product or service is/does. A good case-in-point is a company I've been reading about tonight: they provided three documents in total describing the business, but after reading them, I have only the vaguest idea what the business does. Without this information all the stuff about the team, route to market and competitors is really hard to understand, relate or assess.
I'm sure there are some other great suggestions out there...?

Later ammendment

5. Did you really describe your competitors and their comparative attributes?

This is often one of the most revealing sections of a plan- it's amazing how often it's missing!