What Makes a Community?

I normally write articles that carry a bit of authority. I usually write what I know about and have a high degree of confidence writing. I don’t write often because I want what I do write to carry authority and be hard-hitting.

This is not really one of those articles.

I haven’t done what people like Alex Hillman has done in creating collaborative working environments for independent entrepreneurs at Independent’s Hall in Philadelphia.

I haven’t been an organizer and champion of city-wide entrepreneurship like Josh Baer has in Austin.

I haven’t fostered a product community like they have over at StudioPress with the Genesis Framework.

What I have done is work within the context of a thriving WordPress community of developers, users, consultants and advocates.

I have lived in a city that has made it’s name on entrepreneurship and arts in Austin.

I have helped and supported entrepreneurs in their quest to build products in DC and find ways of succeeding both with and without investment money.

Moving Back to Baltimore

For some weeks now, I’ve made it clear that I’ve decided to move back from Austin to Baltimore. In 2008, I left Baltimore because I saw awesome things developing in technology in DC. At the time, there were guys like Peter Corbett who was just beginning to do technology advocacy work in the Nation’s Capital. By 2009, iStrategyLabs would launch the first Apps for Democracy contest that challenged contestants to create web and mobile applications with civic intent. That would morph into similar contest like Apps for America, etc.

You would also see some organizations that would flare out dramatically because of business model, ideas, weak leadership, lack of community involvement, etc.

I would then move to Austin where I would see a city immersed in technology. Lots of money flowing. Lots of incubator action, such as the products and entrepreneurs who would be graduated from the Capital Factory incubator. I would see ATX Startup Crawl occur several times a year as guests would have the opportunity to move around town and visit some of the great startups like TabbedOut, InfoChimps, uShip and more. Thousands of people would come through these offices and see the great technologies and ideas being built, all while enjoying local Texas beers and eats.

I would see awesome projects like We Are Austin Tech highlight influencers in that community (including myself) come up.

And I watched Baltimore grow as a technology community to the point where DC entrepreneurs started paying attention to their up and coming little brother 45 mins up I-95. I watched from afar as Dave Troy would put his heart and soul into building Baltimore as a center of entrepreneurship and tech. I’d watch as Greg Cangialosi would build his Blue Sky Factory marketing firm out and have a successful acquisition, all while continuing to personally invest more in the Baltimore scene.

I even watched great tragedies like the systematic destruction of Advertising.com by Aol.

I watched this all over the last 4 years and realized Baltimore was coming into it’s own. It had successes. It had failures. It had investors. It had bootstrap. It’s still not entirely cohesive, but from my seat, it looks promising.

So I’ve decided to move back to my home and put my money where my mouth is and see if I can take what I’ve gleaned from DC and Austin and apply it here in Baltimore. I may be one of those failures. Or I may not be, but I’ve got to try.

What Makes a Successful Community?

In the last few weeks, I’ve had several conversations with Baltimore business owners and entrepreneurs, and I’m finding a common question and point of discussion: What makes a successful community? The answers and opinions are intriguing. Again, I can’t say my opinion carries any authority. What I can say, however, is I’ve been in a bunch of communities and witnessed elements of success.

Some folks think a successful business community requires investors who are willing to commit their time and money. Anyone who has gone through the fundraising process knows that hands on investors are the best kind. If a VC or Angel investor can help a portfolio company supplement resources (human capital or otherwise) through their network, they bring quite a bit of upside to a startup. Investors who wire money and never pay attention to their portfolio companies, expecting the founders to execute according to plan, are in my opinion bad investors.

So in this light, some entrepreneurs here in Baltimore find the lack of investment money or engaged investors as detrimental to the community.

On the flip side of the coin, some entrepreneurs seem to be thinking that the mark of a good startup community is going to be in the number of entrepreneurs who are able to successfully bootstrap. There is some validity to this claim as well. The more you can do on your own, the less of your company you’re giving away (as I noted in the “Valleyboys” segment of this article a few weeks ago).

However, there is also value in bootstrapping and taking money, if the situation is right.

Other folks I’ve talked to feels the value is in the number of people attend professional meetups compounded by the sheer number of meetups. In Austin, we have a vibrant meetup community. From the Austin WordPress meetup to Austin on Rails to Austin Lean Startup to Refresh Austin and the list goes on.

My opinion is that a city startup community is built on all these things. It’s not money, really. Money will follow success. Perhaps Baltimore needs to have an IPO or high profile acquisition that allows the company to continue to operate and hire in Baltimore to put them on the map and in the conversation. I don’t really think it’s that, per se, but that certainly helps.

It would help if the State of Maryland was more business-friendly to small businesses, as Texas is. People come to Texas, and more specifically Austin, from California and New York because the environment is notably friendly to small business. More business would be created in Maryland with better business policy. It might even attract out of state growth.

Beyond that though, meetups are important but meetups don’t create value if the conversations end at the meetup. The idea of building something – a prototype – as you might get out of a Startup Weekend is good… if it continues afterwards from prototype to business product.

But I think the biggest thing that makes community grow is collaboration and the willing to share ideas without being defensive, sharing resources without being possessive, sharing physical space without being prohibitive. It takes more that an entrepreneurs flying solo behind his Macbook Pro in a coffee shop, but it takes less than structured office space with prohibitive managerial org charts.

It doesn’t take sacrificing lifestyle on the altar of work, but it does take entrepreneurs willing to gut out ideas by working with other entrepreneurs and customers and transparently sharing war stories of success and failure while helping to mentor others new to the space.

It does takes the karmaic “pay it forward” approach without fiefdoms and regional rivalries to ensure that a rising tide raises all ships. What you put in to other companies you have no direct stake in, but can help with informal advice (when solicited) makes for a circle of life that encourages a community to exceed expectations and move from one level to the next. Mentorship is not an ROI term, but it is critical to the ecosystem.

Am I off-base in my thinking here?

Working the Workshops


Web 2.0 Expo New York 2008

There are tons of informative sessions at Web 2.0 Expo. I especially like the Day 1 workshops. Maybe it’s the no-break, three-hour block . . . the fewer tracks . . . or the reduced traffic, since a good many folks opt out of Day 1 to save money. Shame.

If you’re a coder, there are solid technical workshops. But even though I’ve started up several companies, today I made a beeline for the startup and financing workshops. Why? Mainly because the scene/climate is constantly changing. But also because, just as with a pitch meeting, you always come away with some useful nuggets.

At the Web 2.0 Expo in San Francisco in April, it was ‘Starting Up: Strategies for Financing & Growing Your Web 2.0 Startup,’ put on by Rob Hayes of First Round Capital and Jeff Clavier of Softtech VC. Today, it was ‘Casing the Startup Joint: Real Life Examples of Startup Opportunities, Issues, and Strategic Decision Making,’ presented by Albert Wenger of Union Square Ventures, along with Charlie O’Donnell of Path 101 (Charlie was formerly an analyst with USV).

[Fellow East Coast startups take note: Both USV (New York) and First Round (just outside Philadelphia) are early-early stage VCs. Both are on my radar for CHALLENJ — but despite what First Round says about investing on Powerpoints, I don’t plan to approach either until our app is built; USV makes it clear they want something working.]

Here are a few random nuggets from today:

- Shift from hard-coded documents to live ones Although crafting a clear (if not pretty) business plan is still advised (if for nothing else, it gets everyone in the company on the same page, so to speak), VCs would rather see your competitive analysis in a wiki. “It also tells us that you have an ongoing process for tracking competitors,” according to USV’s Wenger. And if your .ppt deck doesn’t change nearly every time you deliver it, by definition it’s stale.

- Reduce your risks before applying Be mindful of the four buckets of risk before you approach any investor: 1) Team, 2) Technology; 3) Market; and 4) Capital Requirements. Says Wenger: “We can handle one — maybe two — but that’s it. (I’m working on my team — any killer PHP coders out there?)

- Rejection by one VC firm has no reflection on your business Suck it up. Firms like USV do fewer than 20 investments a year (and some of them are later stage). If they pass — presuming you’ve been sufficiently persistent — move on. (The corollary to this of course is, if 40 firms pass on your deal . . . it’s time to retool.)

- State of angel investment The thin g to remember — and it’s good news — is that the number of angel investors is 10x the number of VCs. But you have to work a lot of venues to find them, since most don’t hang out a shingle with wings on it — uncles, friends of the family, doctors, they all count. The bad news? When Wall Street flails (as it’s doing right now), even the wealthy get skittish. As O’Donnell puts it, “The rich tend to write fewer checks when they feel less rich.”

Lastly, it’s always interesting to hear the war stories from other startup CEOs. To be honest, I’ve made enough mistakes that I don’t learn all that much in these ‘true-confession’ sessions . . . but there’s something comforting in knowing that really smart people also did some dumb things.

Do you really want to work in Venture Capital?

I have heard this from many people I have met “I really want to be a VC”. First, why are you asking me when I am not one and don’t have a desire to be one? Let me direct you to some people in the industry and a few who left it to get a good perspective on the business. So I went ahead and asked the question “do you think people should really become VC’s”. Surprisingly, many said no. Why? I will tell you.

The origins of this post were motivated by Seth Levine’s post today How to get a job in Venture Capital revisited his earlier post, How to become a VC and it seems to hit on the same advice that I got from my VC friends in the business.

The gist of it seems to revolve around either going to a top B-school, being a banker or consultant, working in a startup or starting one of your own.

So instead of telling you how to become a VC, let me take a different angle and tell you why you don’t want to be one.

Everyone acts like they want to be your friend but all they really want is your money

When you are an entrepreneur you go to networking events in the hope of meeting investors, you leverage VC networked lawyers and accounting firms to get you introductions. What are you there for? To get money. As a VC you are just on the other side of the table and now when you go to dinner parties you are faced with the “Doctor’s dilemma”. That is when they find out you are a doctor and then they tell you something hurts them and expect a free diagnosis and prescription write up. As a VC you might suffer through people with “hey, I have this business looking funding” or “I have a really great idea, would you fund it?” crap. Just tell them you sell insurance and they will stay away from you.

You get stuck in board meeting hell

As a VC you will sit on boards to meet with the company on a regular basis to see if they are meeting their milestones and vote on critical issues (i.e. stock options, new key hires). The only problem is that this most of your interaction with a company and as a former entrepreneur you will have a tendency to want to be more involved. You can’t. You must keep the deal flow coming through for the firm to make the investments that will create good exits for great payoff to the fund’s limited partners. Yeah, I think that kinda sucks too.

You only really work day-to-day with a startup when it is having trouble

As I mentioned above, you are really only working with them in a board capacity when things are going well. When things start to go bad you have to spend more time and usually have to be the bad guy. You might have to kick out the founder, recommend budget cutting strategies, etc. Yep, that sucks too.

You have to read the most insane business plans

The average VC firm sees about 2000, that’s right 2000 business plans a year. Do the math. If you are an associate you have read around 50-100 per week depending on the size of your firm as an associate. You have to filter the crap from the interesting and then further find the fundable in the interesting ones. Many people blindly send plans that don’t fit the investment size or focus of the firm so they are immediately tossed. Still, you have to find the ones that are good and then have a phone conversation with them. If the chat goes well, they will come and pitch you so can report to the partners about the ones that they should really sit in on. If they end up sucking it reflects badly on you.

Do you like Excel?

When you join a firm as an associate you are analyzing deals from every perspective tearing apart an entrepreneur’s business model to see if it is actually not full of shit. You are also looking at it from various bad-to-great scenarios to understand the risk exposure the firm would be taking in the deal. I hate excel and the thought of living in it just makes me shudder.

You have to work insane hours to close a deal

You work insane hours as an entrepreneur but there is a long term payoff that can be huge. To get a deal done especially if it is syndicated or there is competition from other firms means you have to work insane hours to get it closed. If you don’t you risk losing the opportunity and looking like a lazy idiot to the partners. What is the upside? Maybe a bonus when the fund exits? Maybe. At least as an entrepreneur you can have a little more control over getting a big pay day.

Limited Partners are worse than investors

Investors in a startup expect risk and are betting on you to succeed. They hedge their bets and usually 7 out of 10 deals funded crash and burn. The remaining 2 get a good exit and the remaining one you hope will be the next google. Limited Partners have a long term outlook (7-10 years) for a fund to complete. But boy do they expect results. You might return a solid 20-30% return which is fantastic for any other investments but they might just bitch. Especially if the previous fund had better returns. Yeah…I would love to have that to deal with.

Are there any VC’s in the house?

Many people read the blog and hopefully there are some who are VC’s and could comment. It would be especially great if there are a few out there that have been in the business and left it.

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.

Venture Files Joins Technosailor

vflogo.jpgOver the weekend, we have been hard at work integrating Venture Files into Technosailor.com. As you know, Technosailor has largely been focused on business and technology with a focus on social media and the internet technologies we enjoy today.

As part of the continuing debate surrounding venture capital, particularly here in the District, the content of Venture Files and the enthusiasm of Steve Fisher in writing it is a strong complement to the content already produced here.

As part of this integration, you can expect to see regular venture related content from Steve as he provides his own analysis on the venture ecosystem from the perspective of an entrepreneur. Previous content can be seen here and you can subscribe to the Venture Files feed as well.

I am a particularly strong fan of Steve’s 7 part series on Business Plans.

Welcome Steve and Venture Files to the Technosailor family.

Valleyboys: It's All About the Money

Late last night I was finishing up a presentation for a class I’m taking when Jeremiah Owyang from Forrester made a statement on Twitter which made me cringe. The statement, though profound to someone living in the heart of Silicon Valley, is completely absent any reason to the observer outside of the Valley. Keep in mind the Parable of the Three Bloggers as I quote him.

Quote:

We work really hard in Silicon Valley, why? It’s not the money (only a few strike it ‘rich’) I think it’s the passion for creating new

Someone should remind Jeremiah of the 140 character limit of Twitter. ;)

I take a lot of exception to this statement because it is exceptionally wrong. Not only exceptionally wrong, but naive.

First of all, as an insider it’s easy to say everyone is just working to create and innovate. While that’s true to a certain extent, it was much more true two years ago. As the outsider to the Valley that I am, I’d say the Valley is one of four North American hotspots for money flow – Boston, New York, Canada (Toronto) and the Valley.

That places these four locations on the map as one of the four places every entrepreneur in North America wants to be. The reason why DEMO and TechCrunch 40 were so successful is because entrepreneurs want money!

Yes, they need money. This is true. But the drive for more money is beyond what it was when the interactive web was in its infancy and companies really were sprouting up because people wanted to work passionately on a project. They discovered some idea and the technology had matured enough that the idea could be pursued.

Today, we are talking about San Francisco-based Automattic valuating at numbers well in excess of $200M, Palo Alto-based Facebook (along with some fuzzy math) weighing in at some $15B. GigaOmniMedia, the parent company of GigaOm and the rest of Om Malik’s empire getting $1M+ for hardware, or something…

Everyday, new companies are being funded and it’s mostly in the Valley.

I love the Valley. I love the entrepreneurs in the Valley. I wish I was there living but no job has taken me there yet. But it’s a very introspective and naive thought to believe that the Valley is full of people who just are passionate. Yes, passionate people make the best companies. That I will not argue with. I think there is more passion to get the big exit than to build a solid product.

I could be wrong. Feel free to correct me. ;-)