I am now, have been, and will be Wrong - VC Basics

NYTimes: The New Rules of Angel Investing

2009-11-03T10:05:00.001-05:00

From The New York Times:

SMALL-BUSINESS GUIDE: The New Rules of Angel Investing

The deal makers still exist, but they are pickier and less tolerant of risk.

http://www.nytimes.com/2009/10/29/business/smallbusiness/29angels.html

So angels are still out there. But it is still hard to reach them, and
they have fewer dollars to play with.

There are no guarantees out there, but VC funds may be popping out of
existence soon. If the fund you're talking with hasn't closed on
their money between 2007 and 2009, they might not have money left to
invest.

Or, being lied about, don't deal in lies,

2009-11-01T18:57:00.000-05:00

There will be rumors about your business at all times.
You'll always hear that you're going to lose your best people, your best customer, your best supplier.
The best way around this? treat them well, make sure that they have no reason to leave you. By the time you're asked to re-bid, it is already too late.
I can say ethics, or being a good person should prevent you from dealing in lies, but if that worked, you wouldn't need to hear it from me.
For those of you still on the fence, here's the answer. People have long memories. And they will remember your actions from the past.
A good story gets repeated 3 times, a bad story, 10. This true from customers, suppliers, employees, and any/everyone you interact with.
Your reputation will follow you from business to business, start-up to start-up. How you've handled yourself in situations will become known to others.

If you can trust yourself when all men doubt you, But make allowance for their doubting too;

2009-10-31T00:18:00.001-04:00

When you go out on your own, you'll be challenged on a lot of things. Can you do this, is your idea even viable, will you be the right person to grow the company? Lots of folks will question you. But if you have the mettle, and the facts to back you up, then you can succeed.

Lots of facts are out there, a lot of analysts will give you ideas and predictions. Take them for what they are guesses. No one knows what the future will bring. But entrepreneurs are the only ones who can go out there, and bring their vision to reality. That is creating the future, not predicting it. The folks who are guessing can doubt, but the ones who are making it real have no reason to question.

You will get a lot of naysayers against you. Don't listen to them.

But understand where their doubts come from. Learn why it didn't work 5, 10, 15 years ago. What the conditions were back then, and the solutions to those problems were addressed back then.

Ignore the nonconstructive doubts. It does nothing other than burn calories.

Sharkskin pattern as anti-bacterial surface

2009-10-30T14:38:00.001-04:00

Biomimicry shark-skin vs bacteria

Biommicry will become a bigger source of "innovation" in the coming years, as humans start to follow what nature has already developped.

If you can keep your head when all about you Are losing theirs and blaming it on you;

2009-10-29T10:21:00.002-04:00

There will be chaotic times as an entrepreneur or CEO. You will get too much of the credit and too much of the blame, always.

The employees will look to you for guidance, sometimes expecting you to become an oracle and foretell the future. How you react to these situations will be telling to all those around you.

Character has been cited as the most important trait to have in a partner or as a partner. How you show your mettle will go a long way towards how others will recieve you.

A day in a startup is always filled with turmoil and doubt. It is part of the intrinsic elements of business. Just more intense when you are out there on your own.

Keep you head on, don't panic, and your decision making will be better.

But no gurantees on your decisions themselves.

IF

2009-10-29T10:05:00.000-04:00

If is a big word.

In VC, IF shows up everywhere.

If the technology works

If the customers buy

If we get funding

If we execute

If we hire the right people

If, if, if....

It defines and determines a lot of investments. You take the ifs you can handle, and you abandon those you can't.

I'm going to try and use the most famous IF, Kipling's poem, and see how my thoughts on entrepreneurship and VC investment relate to his lines.

If you can keep your head when all about you

2009-10-29T09:14:00.000-04:00

If you can keep your head when all about you
Are losing theirs and blaming it on you;

Jean-Luc Park

Paul Graham on startups

2009-10-28T10:53:00.001-04:00

Here's his take on what startups are really like

It was sent to me from an entrepreneur friend.

I'll comment on his take of VCs.

He's right. Many investors don't have/need/want a full understanding of your technology.

Why? We're not the ones buying the product. We are buying the company. And we are selling the company. The product is an output of the company, but not the company itself. If the product was worthless, and the company was bought from the investor at a good multiple, it would still be a success. If the product wasn't profitable, but the investor still made a lot of money, then it was a good investment (Youtube).

what makes a good investor is not what makes a good entrepreneur.

His final conclusion, that running a startup != working at job is very true.

where i disagree is that a "job" is the only experience people can relate to.

There are other leadership roles that exist, that some people have done. Times when everything, and I mean everything, is your responsibility. Times when you're cut off from resources that you usually enjoy. These are the times when what you've brought is what you've got.

So be prepared for a wild ride, and don't be surprised when it gets rough.

Simple sells

2009-10-28T10:45:00.000-04:00

From USA TODAY, simple sells.

Pay X, get Y

Straight forward and easy.

But what you get, is more than the item(s) you are buying.

People get peace of mind, comfort, memory, history when they buy products. there is something about how expectations are met with only 5 ingredients. Or 3 for potato chips.

If you don't know what those ingredients are you might be worried. In some products, if you do know what those ingredients are, you'd be worried.

Zombie effect in startups

2009-10-28T10:35:00.001-04:00

An entrepreneur sent me a link on how the past year has been confusing
for entrepreneurs. The internal compass many use to tell if they are
moving forward and making progress has been feeling off this past
cycle.
http://venturebeat.com/2009/10/27/for-silicon-valley-entrepreneurs-failure-is-an-option/

The question is, what were you supposed to have learned?

Everything and nothing. Like a black swan event on the public
markets, this is an unusual event. There will be attempts to treat
this like a one time loss situation. Take your medicine and move on.
There will never be something exactly like this again.

However recognize that these events do happen. And just because the
hundred year flood just hit, is no reason to cancel your flood
insurance.

Realize that these zombie periods can happen and that they could
happen again. The ones fortunate enough to have the resources to
survive this will be free to explore a new landscape. Some will
thrive. Others will experience the pyrrhic victory of surviving the
decimation only to fall before the recovery takes hold. The lucky
ones were the businesses who when through a fast failure. Saw the
impending wave and just shut down. Save your resources for another
day.

It will be cold comfort to the folks who were able to survive so far,
but things could get worse. If not I currently do not see a roaring
return to the earlier days. A new normal is what some folks are
calling it, others say a job loss recovery.

Anyone who was fortunate or disciplined enough to have saved and
shepherded resources will be in a good position soon. Buy when people
are selling. Sell when people are buying. Simple enough words, but
when you have cash you can wait for the right times.

Some goods, people need. Other items are simply wants. What do you
sell? What service, experience, and benefit do you provide? What form
does that service take shape? A car is/has been a transportation
device, a status symbol, shelter from the elements, entertainment, and
many other experiences for its owner.

This has been a difficult and unusual time. Recognize that these times
can happen and that they can happen again. Have a plan, even if that
plan is to shut your doors and wait out the turmoil. Don't wait out
the clock.

Electric cars a national security issue

2009-10-23T17:56:00.001-04:00

Clark says that Electric vehicles are a national security issue

I do like support for EVs. However, any statement of this type means the speaker will also consider tar sands, and shale oil.

I used to put Jim Woolsey in that category, but this past week I heard him speak at OnDC, and he took into account the challenge of using power that pollutes, or nuclear reactors (light water) that can produce weapons grade material.

The conversations are moving towards electric cars, I've already stated that the economics will make sense on a cost per mile basis, and that argument is starting to gain traction.

Short term thinking from Cato answer

2009-10-20T12:36:00.000-04:00

I had asked how to get laisse faire policies to incorporate long term
thinking.

Boazs answer was that government is focused on the next election. And
that companies were looking at a longer time frame.

The problem that still exists is that the management team is paying
attention as long as they they will be around. That time frame can be
shorter than the time frame of an election.

All in all the answer was lacking.

Jean-Luc Park

Optical black-hole

2009-10-15T14:10:00.000-04:00

http://www.newscientist.com/article/dn17980

The idea of having a material that will completely suck in power is interesting. Not using gravity, but instead using meta-materials to guide the waves down into one spot is quite interesting.

This might finally solve the question of what is the "blackest black"?

It could change not only design but elements of color.

On the solar side, yes the key points were highlighted, ability to avoid concentrators. Or have more effective/efficient use of solar materials.

What lessons have we learned?

2009-10-13T09:35:00.000-04:00

How does a company that has survived the past year handle it? Are
there lessons learned over the past year? And what are they?

Do you chalk up everything that happens and call it an "extraordinary"
time and ignore it? No.

These black swan events, or one time incidences are going to repeat.
For the same reason you don't cancel flood insurance the day after the
100 year flood, you don't ignore the lessons of this past year.

Anyone who managed to thrive in this economy has been providing a core
need. Companies that went out of business were supplying wants. The
tricky analysis is done on the companies who can look around and say
that one year has passed, but no growth, no progress has been made.

Their initial idea didn't work. Conditions have changes. Now what?
One year less money in the bank. One year older, one year where the
customer base is prepped but not buying.

Simple solution: fire your sales guy and get someone who can either
sell or tell you why your customers won't buy. And if you learn that
your customers will never buy, stop what you are doing and do
something else.

Go out and keep talking. If you can be a sweetener to your customers,
do so. If you can afford it, tell them that you want to do a trial for
them. Make it short two weeks or so. Track all additional revenue you
earn for them during the trial. If it is really accretive then take
75% of the new revenue. After all it is money they wouldn't have
gotten otherwise.

If there is no money made, the you don't know the market, the
consumers, or the industry as well as you need to. The good news is
that you are one step closer.

and now they've survived. .55";9

and don't know if the past year was somethign to learn

last year sucked
how much did you learn.

NYTimes: Credit Vise Tightens for Small Businesses

2009-10-13T09:15:00.000-04:00

From The New York Times:

Credit Vise Tightens for Small Businesses

Lenders are waiting to take losses in commercial real estate and
credit cards before loosening up money.

http://www.nytimes.com/2009/10/13/business/smallbusiness/13lending.html

This is the new normal. Banks are not lending. They need the money in
reserve for the loan losses they know are on the books. No one who has
commercial or real estate loans out right now can feel comfortable.

The lack of bank support means that these businesses are in trouble.
They might go to angel investors but the terms are going to be very
high. There are no more jobs to hire for. No more sales that are
bottled up.

Even good contracts that want bids are going to become less
competative. This could force many industries to start hoarding cash,
like the tech industry. Because banks failing to finance business has
stymied company growth.

Requirements for loans are much harder than before. Money is tight and
many folks will be happy just to have a job or profitable company.
Cash is king. The old days of burn rate until IPO are gone. Not that
some won't manage to do that, but it is no longer the bplan of choice
for most.

Dallas funds are closing

2009-10-13T08:19:00.001-04:00

From the wall street journal
http://online.wsj.com/article/SB125530238070179117.html

But it is not just Dallas funds that are closing. All around the
country, regional funds are closing. Any fund that hasn't been able to
show a good return is getting no interest from institutional
investors.

There will be fewer funds out there. Anyone able to write a check
will do well. This will further cement the reputations of larger
successful funds. But also allows fund of funds managers to become
king makers. Funds that are seeded at this time will out perform the
risk adjusted return, because they have a greater time line to invest.
And because they will experience less competition chasing good deals.
The ability to buy low has a big effect on IRR calculations.

Lack of sleep deadly

2009-10-12T07:44:00.000-04:00

US News on lack of sleep

Evidence on the dangers of not enough sleep. It is hard enough to get through and run a start-up. Putting yourself behind by not getting enough sleep makes it harder to succeed.

Green building event at the Swiss embassy

2009-10-07T20:40:00.000-04:00

It was an interesting event. Education on green buildings and the
differences in criteria between the united states and EU. How homes
that would be LEED certified in the US would not be allowed to be
built in some other countries.

Jean-Luc Park

Cleantech be the next big thing?

2009-10-07T00:34:00.001-04:00

MSNBC proclaiming that Cleantech is the next big thing

By the time the mainstream press gets in on it, it is time for the early stage VC to move on.

We knew this day was happening, and it's come.

Not to say there isn't money to be made. Only that it won't be made by the early stage folks, not in this space.

Time to transition and move to a different sector.

It could be a while, but right now, the efforts and energies that I have are going to be better spent on a different field. There are enough investors out there who will make any reasonable deal too competitive.

NYTimes: Southeast Drought Study Ties Water Shortage to Population, Not Global Warming

2009-10-05T11:32:00.000-04:00

From The New York Times:

Southeast Drought Study Ties Water Shortage to Population, Not Global Warming

Researchers also concluded that rapid population growth was more responsible for the severe water shortages than rainfall patterns were.

http://www.nytimes.com/2009/10/02/science/earth/02drought.html

Good news, it's not global warming that's causing problem in the South East. It's people.

Too many people moving to a region of the country, and straining those resources beyond capacity. We've seen it in the South West already. We are going to see this situation of too many people in a region replayed in many parts of the world.

CNN article on melting Himalayan glaciers

2009-10-05T11:28:00.001-04:00

Glacier melt in Himalayas will cause problems

CNN's article on what is a known problem among certain circles. As the problem gets worse, we will start to see the impact. When we already have 3 nuclear equipped nations looking at the same source of water, and blaming each other for taking it, it is a challenge. When 2 of those countries are among the most populous in the world, it bodes for a long and challenging solution.

We haven't seen a good resolution in the middle east, nor do we really understand the impact that can happen going forward. The Western world is very fortunate to be able to push this problem off for a little while. Other regions are not as lucky. But the longer we keep doing what we have been doing, the more likely that all portions of the globe will be under water stress situations.

So far, no solution seems adequate. There is a straight-forward approach, Desalination. But not much reserach has gone into that. Especially not when compared to other areas of funding.

From Yahoo, WSJ article on fewer start-ups

2009-10-02T10:04:00.000-04:00

Fewer startups coming

Here's something that wasn't mentioned in the article. Most of those start-ups fail.

Most start-ups fail, no matter when/where/who factors are invovled.

So the fact that there are fewer start-ups at all, can't really be seen as good or bad. It's just a fact that exists.

Now start-ups also include franchises, restaurants, flower-shops, real-estate brokers, lawyers, dentists, etc.

In the VC world, these types of start-ups don't impact investors. They may hire a lot of labor, and represent the majority of the job loss. But for high-tech start-ups the "fail early, fail cheaply" is very true.

Even with VC investments, most start-ups fail. So I don't think a drop in start-ups that try for VC financing will affect the quality of deals, or number of deals seen too much.

Cash will continue to be king, especially as many VC funds close up shop.

Salon and Robert Reicht on unemployment and debt

2009-10-02T09:58:00.001-04:00

Robert Reicht on unemployment/debt

Here's the challenge. When times were good, the government failed to pay down debt, and instead kept spending, federal/state/city the budgets were written and the money spent. The dicipline to pay back the debt seems to be missing.

I agree that unemployment will continue to rise.

The challenge with the US Fed being able to keep buying up product in order to bring back the economy is that in a global network, the fed doesn't have enough money. The same way a central banker can't successfully maniuplate a floating currency. I can't bring myself to understand how a single government can pull up a global economy. Maybe I can't see the entire picture, but it's not just an American or China scenario. The ties of intercorrelated commerce are too numerous to try and cut, and too dense to avoid.

This means I have to agree with his analysis that politics and events are going to get much uglier in the coming year.

Teen Stores Cater to the Ones With Money - The Wall Street Journal.

2009-09-24T17:20:00.000-04:00

So the trick is to sell to the people who control the purse strings. What a surprise.

Teen Stores Cater to the Ones With Money

http://online.wsj.com/article/SB125367349893632975.html

NYTimes: Now Even Millionaires Can See the Benefits of Budgeting

2009-09-21T17:42:00.000-04:00

From The New York Times:

WEALTH MATTERS: Now Even Millionaires Can See the Benefits of Budgeting

Even the wealthy have grown cautious about managing personal income.
Does one buy a Porsche or an Acura?

http://www.nytimes.com/2009/09/19/your-money/19wealth.html

The part that made me take notice was a drop in long term invesments
like VC or private equity. There are fewer and fewer pools of capital
to act as limited partners.

When individuals stop entering these funds, and banks, endowments and
foundations are unable to put much
money to work. Then VC funds will disappear.

These individuals might act more as angel investors, bypassing the
funds and money managers to infuse finances directly. But the managed
pooled money could be at risk.