Here are two interesting articles: one from Glenn Kelman, and a follow on from Guy Kawasaki on why serial entrepreneurs might not in fact be the best bet for funders. Interesting perspectives and I recognize some of Guy's cautions from my own experience.

Worth reading both articles.

This post at VC Confidential contains some fantastic quotes. I have excerpted a few of my favourites.

"The trouble with the first time entrepreneur is that he doesn’t know what he doesn’t know. After a failure he does know what he doesn’t know and can beat the hell out of people who still have to learn."

“All companies that go out of business do so for the same reason - they run out of money.”

"Great markets make great companies."

"I like opportunities that are addressing markets so big that even the management team can't get in its way."

"I am 100% behind my CEOs right up till the day I fire them."

"The world of technology thrives best when individuals are left alone to be different, creative, and disobedient."

"One of my jobs as a board member has been to counsel management to avoid distraction and to execute with constructive paranoia."

All fantastic and useful quotes.

I have to duplicate this entire post here. It's brilliant. Thanks Seth for the post. I filed this under Business AND Life Lessons.

• The best time to start is when you've got enough money in the bank to support all contingencies.
• The best time to start is when the competition is far behind in technology, sophistication and market acceptance.
• The best time to start is when the competition isn't too far behind, because then you'll spend too long educating the market.
• The best time to start is when everything at home is stable and you can really focus.
• The best time to start is when you're out of debt.
• The best time to start is when no one is already working on your idea.
• The best time to start is when your patent comes through.
• The best time to start is after you've got all your VC funding.
• The best time to start is when the political environment is more friendly than it is now.
• The best time to start is after you've got your degree.
• The best time to start is after you've worked all the kinks out of your plan.
• The best time to start is when you're sure it's going to work.
• The best time to start is after you've hired the key marketing person for the new division.
• The best time to start was last year. The best opportunities are already gone.
• The best time to start is before some pundit declares your segment passe. Too late.
• The best time to start is when the new generation of processors is shipping.
• The best time to start is when the geopolitical environment settles down.

Thanks Seth.

Many of you know that I was on the selection committee for "Why Office 2.0 Matters" - a one day conference being organized by the Dealmaker Media team in SF. The one day session will look at 32 of the most promising companies emerging in the Office-productivity-on-the-web category.

As part of the run-up to the conference, the team decided to hold a blog relay - "The Radar Relay" - where different writers would summarize the week's Office 2.0 news at the end of the week. This is my week. But you might want to start here first if you haven't been keeping up to date until now.

• Feb 23, 2007 / Richard McManus
• Feb 28, 2007 / Rod Boothby
• Mar 7, 2007 / Zoli Erdos
• Mar 9, 2007 / Stowe Boyd

 
Also, if you haven’t registered for Under the Radar yet, the readers of this blog can take advantage of a special price at this link. I’ll be there, to see what the judging panel think of the selections that our committee made, and also to give a brief talk about Office 2.0 and Enterprise 2.0.

On with the Radar Relay. Tthis week has been ripe with office 2.0 news. There is so much that I'm going to do it in point-form:

• A web application designed to help people through their bankruptcies was cited for "practicing the law without a license" and its creator was charged and found guilty. The case is currently under appeal. (thanks to Kurzweilai.net for the link).
  
• The Office 2.0 Database tipped the scales at over 450 Office 2.0 startups. 95% of those will be gone in 36 months but who cares? As Paul Kedrosky says, "It takes a lot of dead bodies to fill a swamp" when you want to get to the other side.
• Gianpaolo gave us an 8-floor, 3-bullet point "Why SaaS for the Enteprise" pitch. I would add to his points the ability for users to pilot-test without IT involvement (which really rolls up to shorter time to value though). I think his 3 bullets are absolutely awesome. Concise, and to the point.
• The world continues to twitter about Twitter. Millions of people pinging each other with little tidbits of information on what they are doing at the moment. I know that many of the things that take off seem to confound people but you have to realize that deep down in biological and spiritual cores, we are social creatures. We are designed to be social from the ground up. But as people leave organized religion, and as fewer people get married, and as fewer people have kids, and as fewer people live in multi-family homes, there becomes a vast social vaccuum waiting to be filled - hence the explosion of blogs (find your community), photo-sharing (meet people with an appreciation for art), SMS'ing silly messages to each other, or signing up for Twitter - these are all manifestations of a desire to find and stay connected to a community in an ever more disconnected world.  I don't doubt that we will develop a bunch of these tools along the way and will eventually be in partially aware, partially connected states to our communities at all time - but will be actually be social or have any friends? It reminds me of the quote I read the other day, "I unsubscribed from all of my social networks so that I would have time to invite friends over for dinners!" Also, here is a shortcut to using Twitter.
  
• Google's diabolical plan to plant people in Microsoft is paying off. Microsoft has managed to make Office 2007 and Outlook 2007 both slow and destructive to data at the same time as Google has launched their applications with a service level agreement (that they breached already.) Lots of notes here on Zoli's blog.
• Anne Zelenka posted "Ten Things I Hate About You, Web 2.0". Funny list. Anne, how about Office 2.0? I'll start with my top four most annoying things about Office 2.0:
• NOT ONE COMPANY has managed to make a text editor that doesn't completely suck.
• Do we really need 50 spreadsheet apps? Are we really that lacking in creativity?
• Web 2.0 was about wasting time. Office 2.0 is really about being productive with your time. We need more web 2.0 in office 2.0 or the conferences are going to be REALLY dull.
• Just because you have an Office 2.0 company doesn't mean you have to forget about: customers, pain points, revenues, or long-term viability.
• Phil Wainewright has a good post on the Saugatuck report showing that SaaS has hit the knee of the curve or as he writes: "SaaS hits the hockey stick." I'm sure he meant the curvy part near the bottom of the stick near the big flat part that hits the little round thing-a-ma-jig. Go, Beavers, Go. As you can see, I'm not a hockey fan so I prefer the knee of the curve story a bit more. He writes: "Most surprising of all was a huge jump from 18% last year to 49% this
  year of companies planning to use SaaS for mission-critical
  applications." I think it's instructive to look at internet banking. People didn't want t o use it either because they were afraid of the web - until seemingly overnight when everybody's Grandma joined web-banking.
• Harry McCracken over at Slate wrote a decent review of the Zoho office tools suite. I agree with Harry that their suite seems pretty advanced. However, I have tried to use them for real work and have still found enough holes that I couldn't use them. Particularly Zoho show which was nearly useless. The other apps seemed somewhat better. But they have achieved a heck of a lot and I wish Raju Vegesna and his team the best.
• AvenueA-Razorfish's new Digital Outlook Report 2007 was released (thanks Guy Kawasaki for the heads up). Some highlights:
• "In retrospect, the massive digital disruption we’ve experienced over the last 12 months should have been anticipated. But it seems few were fully prepared for the speed and depth of the changes. Perhaps it’s because the changes weren’t just about what Web sites became popular or what new technologies were introduced. Rather, it was a broader cultural change. Consumers’ expectations of their media evolved. The places they trusted to provide information and entertainment changed. New outlets for consumers to express themselves emerged."
• "“Great service. Creativity. Flexibility. A passion for their product and for finding ways to push innovation within their organization. A desire to understand clients’ objectives and not to retrofit them into their own. The hallmarks of great Web publishers are obvious, yet subjective and elusive. Those who are focused on delivering real solutions are best positioned to become partners to agencies and advertisers.” - Sarah Baehr, VP Media, New York.
• "Information seeking equals entertainment: Once upon a time, play was more deeply integrated into our daily lives, but that changed with the introduction of industrialism. Then came the Internet, and with it, a reemergence of play in new ways. Information as entertainment was a core concept we heard from our study participants, and one that we can see around us as well....Any way you look at it, play is back, and it’s here to stay."
• "Mobile phone use will grow—but not for talking, according to our participants. Phones calls are considered to be invasive in this hyper-culture, to be used only when necessary. For ordinary use, a quick text message will suffice, and many of our respondents didn’t see themselves reversing this trend in the future."
• Overall, this is a fantastic report. Get it. Read it. Take action on it.
• Dick Costolo wrote a great post titled Too Many Companies? where he addresses an entrepeneur's question about whetehr or not he/she should go out and try to capitalize on a maket opportunity. I agree with Dick. You can't know anything really when you start. It's all a best guess. Once you have done the basics of identifying whether you are entiering what could be a high-growth market, something that you are passionate about, and that you have (or can soon have) a great team to build something with, then get out there and do it and adjust on the fly. Not wait until you "have it figured out".
• Cisco bought Webex. For 64x earnings or  8.4x revenues. ($3.2B for 2006's $50M earnings on $380M revenues). I agree with Michael Arrington who questions the value of such a deal when Webex is being disrupted SERIOUSLY by a lot of light, fast, cheap, and frankly much better competitors. Of course, Webex has real revenues that will accrue to Cisco's bottom line and can actually "move the needle" on Cisco's income statement. Hopefully they were buying the revenues and not the technology. I also agree with Paul Kedrosky who says "While this is not your father's Cisco, it's not clear just whose Cisco it is becoming either." When they bought Five Across, it could have been an aberration. Adding Webex to the mix means it is definitely a trend. For it to make any sense, there would need to be some follow-on acquisitions that signal a clear shift in corporate strategy and a redefinition of what and who Cisco intends to become in the next few years.
• Darren Barefoot did a nice little review of three new-to-him Web apps: Harvest for simple time tracking, Buxfer for moving money easily, and WhosOff for tracking holidays in the office. Very fitting for the Office 2.0 Relay!

That's a heck of a week!! Lots of interesting things happening and I'm sure we'll have another crazy week next week as we get close to the actual Dealmaker event.

Have a great week ahead everybody!

On Monday, March 26th, 2007, Bob Chaworth-Musters and his team will once again be offering their Investor Ready 101 course, a fantastic day of coaching for young companies to learn how to prepare their investor pitches. This is a lead-in to the Angel Forum that will be held on April 24th, 2007.

At the Angel forum, my friend Martin Bliemel and I have the good fortune of facilitating a day of investor pitches where 30+ companies will pitch 70-100 investors their idea for a new venture. The Angel Forum was founded in 1997 by Bob Chaworth-Musters and is now the oldest and largest angel group in Canada. To date, it has held 20 Angel Forums in Vancouver resulting in over $20M being raised for emerging companies..

This site contains my general blogging, published articles, and information on speaking dates where I discuss how business, technology, and finance can be used to create an open, healthy, and environmentally and economically vibrant society. Please feel free to contact me at troy at troyangrignon dot com to rant, discuss, or have me speak at your organization.

Here are the day 3 notes for the Web 2.0 Conference in San Francisco:

[My notes and analysis are in these square brackets.]

Disruption Opportunity: Venture Capital: Roger McNamee (private equity) and Ram Shiram (seed investing)

• Shiram: I DO believe that it's cheap to start a company; it is hard to find talent though.
• Content companies are very hard to build; both Roger and Battelle (MC) have built content companies and they take a long time and they're very difficult to build and grow.
• Question: So let's pretend that Stikkit asks for (and gets) $5M. They only need $100K to build the company...but what do they do with the other $4.9M?
• Answer: Yes, having too much money is a problem for startups - "indigestion is worse than starvation."
• McNamee: "A lot of the most attractive ideas need less than $1M"
  
• Shiram: the math doesn't work today putting out $5-10M per deal in a $500M fund. There will be a lot of companies purchased in the sub-100M range. Another problem is too much money floating around there. If you have a great idea and a great team, you can go to an auction model. But don't equate money with success. If your valuation keeps going up, your exit becomes expensive and then there are only 6 companies that can buy you out. So be careful of increasing your valuation too quickly and pricing yourself out of the market from an acquisition perspective.
• Question: "We built an app for $75K and we're going to sell it for 20x. Why do we need you?"
• Shiram: "You don't need me. Building your business and serving people is your primary job. Raising funds is secondary."
• McNamee:
• Ram is talking about getting people to your site and keeping them there. What about the people who don't have time to go to your site and will never go there?
• User-generated content is an alternative to passive entertainment and will be huge.
• The amount of cool stuff going on to service that market of content producers is lame. I would look at enabling forms of user generated content.
  
• The second issue is time: We all have multiple inboxes. If you let it pile up for six months, 98% of it will go away and 2% will be important.
• The two important things are: a) saving time and b) connecting people who don't and won't use the web to the web to allow them to generate content
  
• [what does he mean, connect people who don't and won't use the web...to the web. HOW?]
  
• Question: IPO route: is it closed and why?
• Shiram: companies less than $1B don't get any notice from the analysts anymore. I suggest that if you are a smaller company, go for an M&A exit instead.
• McNamee: "Fear is transitory and greed is permanent" - the IPO route will come back. But my approach is: "Build something great and the exit will take care of itself. I don't worry about pre-building to exit. "
  
• Question: "I'm an entrepreneur. How do I ensure I won't get kicked out and how do I deal with valuation?"
• Shiram: "Most good investors won't kick out a passionate founder. Don't worry about valuation. Just find smart money and work, work, work!"
  
• McNamee: "Focus on the size of the pie, not on the size of the slice. If you're focusing on control, quit now!"
• Battelle: "I disagree - keep >51%".
• [Troy: Battelle's comment is misleading. One can own 99% of the company but there can be terms on the term sheet that are so onerous that you effectively have no control of your company. I know of one case where an entrepreneur had signed a term sheet that dictated that his VC had signing authority for everything over $5000 AND that the VC had all the controlling votes. Don't just focus on the ownership percentage! Battelle's comment is fear-based - was he burned in his content company that he mentioned?]
  
• Question: "What is smart money?"
• Shiram: "Try making judgements - you will make mistakes";
• McNamee: "Don't focus on the fund - focus on the person. Find the person who you want to call at 2am with bad news and also with great news and who have the contextual expertise about your business."
  
• Question: "We're looking for $5-15M and have been having a hard time finding it even though our technology is great. Where do we find that capital?"
• Shiram: "You shouldn't have trouble raising money because there's so much of it out there."
• McNamee: "Don't complain if it's hard to do. Entrepreneurship is not for lightweights. Life is hard."
  

This is without a doubt the best business movie of the year for its content. And it is probably one of my favourite movies of the year for its film quality as well.  This movie is BRILLIANT.


It is the true story of a men's brogue shoe factory in Northamptonshire, England that in order to survive, stopped making men's brogues, the market for which had been swamped by cheap Eastern European knock-offs, and found their "niche market" - kinky boots for drag queens and transvestites.

It is: a story of commtment; advice on how to be open and flexible to changes in your business environment; a treatise on finding opportunities  in the strangest of places;  a tale about how to be true to oneself; a lesson on respecting others even if they are different than you; and finally a lesson on leadership.

The other thing that I love about this movie is that it has a strong story, a lot of heart, it used fantastic venues (a one hundred year old factory), and it employed a bunch of the shoe factory employees in the movie. The writing was great, the scenes that were awkward and tense were intentionally written that way and it was not played up for laughs. There are a lot of moments in the film that you really want to end because they're uncomfortable. But that's the magic. Those uncomfortable moments are there in life!

Go rent this movie.  And if you are a business school leader, show this to your class. Here are some great lessons that I found. Which ones will you find?

• A company is a collection of individuals who have committed their time and energy to the enterprise. Respect them and respect their commitment. Show them your loyalty - they deserve it.
  
• If disaster strikes and you have to lay people off, don't make excuses. Do it quickly and cleanly. It will suck and that's life.
• Before you lay them off though, ask them for their ideas. They are close to the work. They will surprise you and may even save the company.
  
• Look at your business environment for big changes. When they come, change your business, change your product, change your service. Adapt or die.
• Look for new opportunities every where you go. Do this by finding somebody who is in pain from an unfulfilled need. Don't try to create a market - find one that is underserved or not at all served.
• If you and your life partner don't want the same things, you'll never really reconcile it. You're better to move on and live out your lives apart.
• Also, if your life partner can't support your 100% commitment to your business, your partnership will fail. It's hard enough to run a business. It's impossible to do it when your partner isn't there to support you, or worse, is acting against your effort.
  
• Work with your customer to build rapid prototypes and get rapid feedback. If they tell you it's wrong, then go back and do it again.
• Forget your old business so that you can learn your new business. The old assumptions and beliefs and goals are probably not true. (In this case, the factory went from selling "life-long comfort" to selling "Two and a half feet of tubular delicious SEX!")
• You can push your people hard but only if they know that it's for them and not for you.
• Sometimes the tide of attitude can shift away from you or towards you on the suggestion of just one person in your team who holds a lot of sway. Earn that person's respect and you have earned the respect of the group.
• Aim high. Choose big hairy scary goals that are way beyond your comfort zone. (I disagree with the "S.M.A.R.T." goals approach in life.)
• You can run from your childhood but you can't hide. You don't need to "deal with it" all first, unless it's getting in the way of your life. In which case, go figure it out and then get on with things.
• Life, relationships, business, sex, gender, psychology - they're all messy and uncomfortable. And that's the way they're supposed to be.
• Find something you want to do. Pursue it with all your heart. And share that adventure with people you care about.
  

This was a fun week. I'm involved in the Telus New Ventures program which is a business plan competition sponsored by Telus each year. Up to 60 teams of entrepreneurs submit business plans and go through rounds of mentoring and judging, mentoring and judging, until one plan is chosen as the winner of $60,000 of cash and in-kind donations.

So I attended as a panel mentor on Wednesday July 26th which meant sitting in a room and watching five different companies present their "pitch" and then offering suggestions for improvement. The quality as always was variable. Some of the contestants were still missing the basics such as:

• who is in pain?
• how big is this market?
• how fast is it growing?
• who is your team and what makes you think you can pull it off?
• what is your competitive analysis?
• what is your go to market plan?
• what is your financial plan?
• what will you do with the capital raised?
• what does your investor get in return

Obviously there is work to be done on just getting people to get through the competition with the basic checklist questions answered. But there was a lot of passion in those rooms!

And on Thursday July 27th, I had the pleasure of attending the Ernst & Young Bootcamp which was a session with Joe Timlin from Growthworks, Sean Wise from Wise Mentor Capital, and Lonny McLean of Layer7 Technologies.

I have seen a LOT of financing presentations. I started attending them back around 1999-2000. I would have to say that this was probably one of the simplest, clearest, and most frank venture finance presentations I have ever seen. It was dense, it was informative, it was funny, it was sad, it was personal, and despite the failed air-conditioning, everybody stuck it out because the material was just so damned good.

Sean and Lonny, thank you for sharing your horror stories alongside your successes. Unfortunately I didn't catch Joe's talk since I arrived at the session late.

I wish I had seen this presentation YEARS ago. It would have been a great shortcut in my learning.

There has been a lot of talk about how Web 2.0 doesn't need VCs. The general outline of the discussion is thus:

• Web 2.0 companies are capital efficient and don't need a lot of money
• they should start small and grow efficiently
• VCs have certain size thresholds below which they won't fund because the overhead involved in managing 50 small investments doesn't make sense when they could instead manage 10 investments that are 5 times larger

So this leaves the Web 2.0 companies somewhat in the lurch (DabbleDB's recent funding round by Kedrosky/Ventures West aside - Kedrosky is an exception to the rule because he "gets it.")

I'm curious to know if there are any funds out there that are trying to place say 30 placments of $100-200K. This would only be a total fund size of $6M which is peanuts to a VC. But it would be interesting to see if the pay-off would be worth it.

Particularly in light of the recent posting about Vinod Khosla's successes having come from his smaller rounds. (No, I'm not suggesting that I can pick companies like Mr. Khosla! In fact, if you believe the numbers, firms such as his see the majority of the good deals and the rest of the world never gets to see them, which throws this argument off significantly.)

This came up again Day 2 of Gnomedex 2006 when Marc Canter and Dave Winer commented to a fellow from Intel that "any time Intel Capital funds a company - we assume that the company is going to fail" and they suggested that Intel Capital look at breaking their fund up into much smaller chunks and funding 1000 companies for a $100K each rather than 10 companies for $10M each. (I may have those numbers totally wrong - I didn't capture the full comment in my notes.)

Brad Feld disagrees with this approach.

Regardless of how it is done, for my company it would be interesting to do either a placement model or licensing model or even throwback to the days of artistic patronage and come up with some sort of "sponsorship" approach where we can, in a low-friction way, put funds into promising and interesting startups with as little contractual friction and impact on both companies as possible. I'm not sure if there is any other model other than the ones currently being employed.

What do you think?