TECHcocktail DC – The DC Tech Scene is definitely back

I have seen my share of networking events. Back during the dotcom era it was full of open bars and crazy companies with the latest software to change your life in some way. Then it was all about buying stuff on the web or a portal for something or another.

After the bubble burst most people were just trying to hold on and all that you had a choice between in the DC area were NVTC (Northern VA Tech Council) and Potomac Officer Club events. NVTC was very government focused and who mostly showed up were service providers (I have the 100’s of insurance and lawyer business cards to prove it). POC events were big events with well known people but not alot of good networking.

One good networking event I liked was the Tech Prayer breakfast but that was only once a year. What most of us were left with was going to conferences, usually not here, to get our networking on and find fellow entrepreneurs and real innovative thinkers.

Lately, there has been a change in the winds here in the DC area. With events like PodCampDC and Social Media Club’s events we are starting to see our cutting edge tech scene finally re-emerge. Last Thursday night it was totally confirmed with the TECH Cocktail DC event. It was held at MCCXXIII (1223) in DC. A swanky place that is over-priced for my usual weekend partying but this event had cheap drinks (thank you drink tickets) and about 300 people.

Below is a picture of the scene at the height of the evening.

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While there have been many events that have drawn 400 people, this was different. Almost everyone was doing something startup related that was really cutting edge. There were social media people there (Technosailor and me included), innovative startups and actual investors looking to network.

There were also a great group of sponsors with great products to demo. Here is a great list from Jimmy over at EastCoastBlogging:

AwayFind – a product aimed at helping combat the email problem by letting your contacts get in touch with you via an online form.

iGala – a digital photo frame with a touchscreen interface that connects directly to Flickr and Gmail to stream photos to the frame like a slideshow.

Loladex – offers local recommendations from your trusted network of Facebook friends.

Odeo – launched a new beta verision which offers both search and personalized content (audio and video) recommendations.

Voxant – a free licensed content offering for publishers which offers a pageview based revenue share to anyone that embeds the content on a their site.

WhyGoSolo – a new social networking site aimed at helping you to create spontaneous new connections so, as its name implies, you won’t go solo any longer.

A huge amount of thanks go out to Frank Gruber and Eric Olson who do the TECH Cocktails around the country and they need to do it more than once a year here.

The vibe around this region is changing and since we will never will be Silicon Valley and never want to be, it is fantastic to see that there is a refreshed ecosystem of entrepreneurship here in the region.

Photo courtesy of jgarber

Editor’s Note: Some comments don’t seem to apply to this post as viewers of a show I was on were instructed to leave comments on this blog to get an invite to BrightKite. These comments will be approved but do not necessarily go with this post. Sorry!

The Jolly Green Bubble

Earth Day was yesterday. I my college years all that meant to me was that the band Green Day was coming to town to play. Now it means “save the planet, if it can make us money”.

“Greed, I mean Green is Good”

CNN, the New York Times, Business Week, Advertising Age, “Good Morning America,” the Sundance Channel, Reuters, the Discovery Channel, Marketplace radio, and a slew of local papers. Newpapers? You kill trees to create a huge insert about Earth Day. Is that not the stupidest thing you have ever heard. And a surprising number seem to have some variation of the same two questions:

“Is all of this focus on the greening of business merely a fad? When will the bubble burst?”

Green tech and marketing means green dollar signs for companies like GE, Disney and BP. NBC has created this load of crap called “green week” for their TV shows which is a thinly veiled attempt to sell their “green” products sold by their parent company GE. Disney announced a new “green movie” division which will capitalize on people’s concern with the environment so they can get more ticket revenues and DVD’s sold. BP is all about alternative energy these days and while they have been the most progressive when it comes to solar and natural gas they are really doing it to hedge their position as oil prices rise and people are ready for an alternative that must come within the next five years. I mean have you filled your tank lately? Bought a loaf of bread? It is crazy and things definitely must change.

There are motivating factors that support the argument that “Green is Good”. Here is the bullet list from a post by Joel Makower:

  1. The problems aren’t getting any better.
  2. The political will is finally emerging.
  3. Consumers are waking up.
  4. The supply chain is gaining power.
  5. The environment has become a fiduciary issue.
  6. The bar keeps moving.
  7. Companies are moving beyond “sustainability.”
  8. More companies are telling their stories.
  9. Clean technology is changing the game.
  10. There’s money to be made.

The bubble is growing

I am the farthest from a bleeding heart liberal, tree-hugging, save the polar bears person you will find. Although Polar Bears are just so darn cute I am not turning my air conditioner down during a heat wave in the DC area this summer to save them. I am also not a cold-blooded oil junkie who thinks that this global warming thing is a myth. I just think that the real intentions of being concerned for our environment has caused the investment community to pop its head out of its butt and see greedy potential to fund investments in everything “green”.

Since most of us survived the tech bubble we have learned our lessons and despite the Web 2.0 wave causing a mini investment bubble, we still have kept most of our sanity because the IPO market really hasn’t returned and the M&A wave is slowing down too. Most who couldn’t get jobs when the tech bubble burst left the industry and you guessed it, become real estate agents and mortgage brokers. As some people bounce from bubble to bubble, we will probably start seeing “Environmental
Consultants” and “Green Advisors” to, and pardon this one, “advise and recommend to companies how they can become more green and offset their impact on the environment”.

With the rising price of oil we are near a tipping point where many technologies are on par with the cost of traditional fuel so it will start to make economic sense in some cases. Where it doesn’t make sense is to stop growing wheat so you can grow corn for Ethanol (which takes 2/3 of a gallon of gas to produce a gallon of ethanol) causing wheat and rice shortages around the world. Right now in developed nations people spend 10% of their income on food and in developing nations it is around 80%. We have enough food to feed the planet but we just can’t afford to get it there. If we start diverting resources in the name of “green living” to make ourselves feel better the ramifications might be worse than we could imagine.

Oh crap, the Government is getting involved

The state of the government getting involved is a mess. I think Thomas Friedman sums it up well. “Some lawmakers are pushing corn ethanol from Iowa, either because they hail from that area and are looking to give more welfare to farmers by wasting money on an alternative fuel that will never reach the scale of what is needed, or because they plan to run in the Iowa caucuses. Others are pushing huge subsidies to turn coal into gasoline, because they come from coal states. Those who don’t come from Michigan want higher mileage standards imposed on Detroit, while those who come from Michigan prefer to continue their assisted suicide of the U.S. auto industry by blocking tougher mileage requirements.”

So you ready to call me “chicken little” yet?

You really call this “Green Investing”?

In the venture community we are seeing new funds popping up dedicated to “Green Investing” which in a diversified portfolio is good for funding innovations that will only help our world. What is really scary is many funds without the proper background to invest in this sector are jumping all over anything with buzzwords like “alternative energy”, “biofuels” and “eco-friendly”. VC’s like John Doerr cry when they talk about the environment and are dumping millions into companies that do things like nano-solar and grid optimization technologies. Hedge funds like Winslow Green Growth Fund are seeing their portfolios transform with the rush of new companies and new investments.

I hear a popping sound….

There are two popping scenarios:

1. Green will index within the mainstream and become ubiquitous.
It sticks. People keep pushing corporations to deeper levels of sustainability. Greenwashers fall on their face because it’s an unfulfilled promise, and then they mean it and real change happens. Green becomes ubiquitous. Smaller, plucky green companies struggle to regain any competitive advantage. When everything is green, green means nothing. (The study of green language is already there.)

2. It’s a fad and will vanish back to the margins of our society.
Green Fever goes away because it is a trend, a fad. News stories drop off, the chasing arrows shrink smaller on the back of packaging again, people stop bragging that their letterhead is 100% FCS Certified and Acid Free. Some small vestiges will still remain, and progress will have been made. New products were launched and the consumers will be more aware. But the trend died… popped.

Final thoughts…

I do believe we are economically in trouble as a country and I do believe that we are beginning to see the beginnings of a “green bubble”. However, as with bubbles like the tech bubble we saw massive innovation that benefits us to this day. So while there will be many bull**it artists and charlitans convincing investors they can solve the planets problems there will be innovation that will benefit us and the entire planet. I would just caution people on two things – don’t invest in every “Green IPO” when the fundamentals don’t work and don’t transfer your career into this field unless you are already in it or willing to passionately stay in it the rest of your life. We don’t need armies of unemployed “green consultants” trying to come back to tech in five years when the bubble bursts, because it eventually will.

Please leave your comments below, I want to hear from the evil oil people, the treehuggers and especially the Polar Bear lovers.

Business Plan Series: Part 9 – Financials

As we come toward the close of our business plan series we reach probably the most important section of the plan next to the Executive Summary, the Financials section.

Despite the work you put into creating a stellar business plan most investors will read your executive summary first and then dive right into your financials. Their reasoning is to see how well you have thought out your business model, when you will reach profitability and with a proper exit will it provide the return on investment they are looking for.

So what are the core elements of the financials section?
The financial plan section of the business plan consists of three financial statements, the income statement, the cash flow projection and the balance sheet and a brief explanation/analysis of these three statements.

The way I have done most of these in the past is to build my financial model to detail the relevant expenses and revenue streams to automatically create these statements but also allow me to model the business and change things based on various assumptions.

When it comes to expenses think of your business expenses as broken into two categories; your start up expenses and your operating expenses. Startup expenses are all the costs of getting your business up and running go into the start up expenses category. Operating expenses are the costs of keeping your business running. Think of these as the things you’re going to have to pay each month. Your list of operating expenses may include salaries (yours and staff salaries), rent or mortage payments, telecommunications, utilities, promotion, loan payments and office supplies.

That is just a partial list of things to get you started. Your operating expenses are the costs of what it will take to keep your business running each month. This is also called your “burn rate”. If you take your startup costs and six months of operating costs that is the general rule in how much money you will need to get your business going long enough to get revenue coming in to get you cash flow positive.

Beyond the core financial statements
Many startups can take longer because they have development and staff costs that are high and have such an extensive burn rate that they need outside investment. This is why your projections and return on investment are so important for others to understand what they are getting themselves into. About.com sums it up nicely with what you will need:

  • A short-term projection of the first year, broken down by month
  • A three-year projection, broken down by year
  • A five-year projection. Don’t include this one in the business plan, since the further into the future you project, the harder it is to predict; however, have it available in case an investor asks for it.

Scenarios
Another thing you must consider in your financials is the case of scenarios. Scenarios are projections that show what the business would look like if certain things happened. Things like no customers for a while vs. a quick rush of new customers, rapid development costs vs. slower development costs.

You really only want to show two scenarios

Funding Requirements
For many of you going out and getting external funding will not only be required at some point it will be mandatory in order to meet the goals you have set out to achieve. From your financial model you should write in your summary and be able to show on your projections the following:

  • Funds required to start the business
  • Anticipated funding over the next two, three, and even five years
  • Use of funding
  • A timeline for funding

Good link love
Here are some excellent links on financials:
Michael’s Big Idea
SCORE Templates
About.com – Financial Projections

In our final section, Part 10 – Appendices, we will discuss all the stuff you would love to have put in your business plan that would add value but made it a 160 page plan instead of a 25 page plan. These documents are the things that will be critical as you move through the review and due diligence process with potential investors.

If you have thoughts on what you would have done with your financials and what advice you can share with others please leave it in the comments.