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.

Read More

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.

Read More

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.

200804271640.jpg

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!

Read More