Florida Venture Blog by Dan Rua

Help Haiti

noreply@blogger.com (VC Dan) — Thu, 14 Jan 2010 16:31:00 +0000

Like many of you, I've been wondering how best to help the Haiti earthquake victims. The following list (thanks Bro!) makes it easy...

Disaster relief organizations are mobilizing to aid Haiti - and are asking for help. Funds are needed to provide enough safe water, temporary shelter and vital medical supplies.

UNICEF and Save the Children already have emergency teams in Haiti, and the Red Cross has released $200,000 in disaster funds.

You can donate to these groups:

- Text Yele. Wyclef Jean is urging donors to text 'Yele' to 501501 and make a $5 contribution to the relief effort over cell phone. Click here to get more information via Wyclef's foundation page.

- Text HAITI. For those interesting in helping immediately, simply text "HAITI" to "90999" and a donation of $10 will be given automatically to the Red Cross to help with relief efforts, charged to your cell phone bill.

- Save the Children. Donate at savethechildren.org or make checks out to "Save the Children" and mail to: Save the Children Income Processing Department, 54 Wilton Road, Westport, Conn. 06880

- UNICEF. Go online to unicefusa.org/haitiquake or call (800) 4UNICEF.

- Red Cross. Go online to redcross.org and click Donate, or call (800) REDCROSS.

- Direct Relief International. Donate online at directrelief.org.

- Mercy Corp. Go online to mercycorps.org or mail checks to Haiti Earthquake Fund, Dept. NR, PO Box 2669, Portland, Ore. 97208 or call (888) 256-1900

To find information about friends and family in Haiti: The U.S. State Department set up a toll-free number to call for information about family members in Haiti: 1-888-407-4747.

The department said some callers may receive a recording because of heavy volume of calls.

The State Department has also set up links on its Web site to facilitate donations to disaster relief agencies.

**For a list of other charities active in Haiti or for additional information, please visit http://www.msnbc.msn.com/id/34835478/ns/world_news-haiti_earthquake/

How to Approach VCs

noreply@blogger.com (VC Dan) — Thu, 10 Dec 2009 19:10:00 +0000

I got a great set of questions from an entrepreneur (Delena) on an earlier post, concerning how to approach, qualify and follow-up with VCs. I've heard these tactical communication questions a bit more often in the past year so I thought I'd expand upon at least one of Delena's questions here.

Delena asked "How long should one pursue a [VC] firm?" My first answer is to pursue appropriate investors until you no longer need funding, but the devil's in the details.

Chum the Water, Before Baiting a Hook

You've seen those deep sea fishing shows, right, where they throw meat out well before casting a line? This is especially true for shark fishing. Well, given how the popular media likes to equate VCs and sharks (think SharkTank), follow that same approach for engaging VCs. Reach out to appropriate VCs well before you need funding and start a relationship that invites curiosity or informal advice. Share what you're doing, maybe an exciting announcement, and solicit advice, not money. Believe it or not, VCs are much more likely to engage if they're being approached for their "infinite business wisdom" instead of their checkbook. This requires more legwork than just emailing executive summaries, but getting to know VCs before you need money is critical to getting their attention later. This also provides an opportunity to understand a VC's hot-buttons so you can demonstrate progress on those prior to pitching for investment.

Be Persistent, but Polite

Now, once you have baited your hook and cast it out, what if you don't get any nibbles? That period just after submitting an executive summary or business plan to VCs is one of the most uncertain for young entrepreneurs. What does silence mean? How soon is too soon to follow-up? My advice is to be persistent, but polite. Give VCs about two weeks to work through dealflow and review your plan, but after that follow-up weekly in a multi-modal, but polite way. This is a simple concept, but less than 1% of entrepreneurs execute on it. Follow-up emails, phone calls, and even twitter DMs should always stay professional, but push for the next step of call, meeting or feedback. VCs review thousands of plans a year and you want yours on the top of their inbox as much as possible -- each ping gets it another look until they decide a formal next step. In addition to getting attention, this process also demonstrates to a VC how you conduct business -- persistent entrepreneurs win customers, partners and top talent. The worst case of being persistent, but polite, is you get a "no" sooner than you might otherwise -- but even that's better than staying in limbo.

Gather Believers, Even if they Don't Give to the Cause

What if you chum the water, bait the hook, follow-up in a persistent, but polite manner; and it still results in a "no"? Well, I'd suggest you are after two things when talking to a VC: 1) believe and 2) invest. A "no" on investment doesn't foreclose the potential of gaining a believer in you, your product, or your market. Try to find out what area of your opportunity a VC does believe in, and what areas are a problem. Then, add that VC to an ongoing distribution list for future updates. This is another tactic that less than 1% of entrepreneurs utilize. If you get me on a distribution list of updates, you have the opportunity to grow my belief over time and address problem areas so I'll re-engage. For example, if a key missing piece was customer adoption, an email that mentions landing a big customer might cause a VC to reply for an update. Even if it doesn't pull a VC back to you, you never know when VCs are networking and your company is mentioned. If multiple VCs are aware of your latest company wins, there's a higher likelihood they will compare notes on your opportunity. Likewise, a VC familiar with your progress might point customers, partners or talent your way.

I've seen plenty of other tips for approaching and attracting VCs, particularly as it relates to qualifying the right VCs. These tips are not a replacement for those; just communication tactics once you've decided who to approach. I hope they help...

UPDATE: In the comments, Sam highlighted another great resource on pitching VCs, put together by Mark over at GRP. I think it's so useful, I wanted to highlight here -- and throw some linklove to yet another VC who understands the power of in-stream advertising.

IZEAFest at SeaWorld Recap

noreply@blogger.com (VC Dan) — Fri, 09 Oct 2009 15:16:00 +0000

After attending IZEAFest @ SeaWorld last weekend, I was planning to share a summary of the event here. However, I see that Convention News TV has already created a very nice video detailing the event, including clips from speakers such as Chris Brogan (@chrisbrogan), Aaron Brazell (@technosailor), Rae Hoffman (@sugarrae), and others.

IZEA and other attendees did such a good job documenting the event, I'll just share this media feast:

IZEAFest video on UStream, Sponzai walk-thru & Murphy/Feldman/Rua interview, IZEAFest video on YouTube
IZEAFest on Twitter
IZEAFest on blogs
IZEAFest pics on Flickr (remember: these are attendee-generated pics from the conference and after-hours networking...view at your own brain-melting risk)

If you remember nothing else from this cornucopia of media, remember that yet another IZEA innovation was unveiled: Sponsored Guest Posts via Sponzai

Florida Growth Fund

noreply@blogger.com (VC Dan) — Fri, 02 Oct 2009 17:24:00 +0000

Earlier this week I attended a Florida Venture Forum welcome event for the Florida Growth Fund, a $250 million hybrid fund-of-funds managed by Hamilton Lane for the Florida State Board of Administration. A say "hybrid" because the fund has two missions: 1) invest into Florida-focused venture capital funds and 2) invest directly into Florida companies. It's not clear how much of the fund will go into each of those buckets, but their investment amounts per deal/fund are roughly $5-15 million.

A couple of the principals from Hamilton Lane spoke at the event, Greg Baty and David Helgerson, and it was very well attended. Both Greg and David are drinking from a firehose at the moment, Florida is a big, diverse geography for venture capital. They are doing a good job of meeting the right folks around southern, central and northern Florida. In parallel, they are also dealing with the logistics of fund creation, including new offices in Ft Lauderdale and Orlando.

Attendance included local entrepreneurs and venture funds from inside and outside Florida. As predicted for years, a pension fund commitment to local venture capital has focused venture fund attention on Florida -- pulling venture funds to the event from just about every state in the Southeast, and some beyond. Now that we've got the attention, it falls to Greg, David and their team to pick the funds and companies that will drive the best investor returns for FSBA.

Their mandate sounds pretty broad, covering early & later-stage venture capital funds and multiple industries for direct deals. Although they're after Florida direct deals and looking for funds with a Florida connection, they are not bound to Florida-only funds. For direct deals, they will not lead and price rounds, but would consider following-on up to half of a round. At the event, they announced their first two investments: 1) Voxeo and 2) an unnamed later-stage venture fund.

In my opinion, the hardest part of their mandate will be to balance priority on near-term small wins and long-term results. I was in Tallahassee when the Florida Growth Fund was announced and I remember a media question about "when can we expect results from this FSBA program?" Part of the answer mentioned seeing near-term (3-4 years) "points on the board" -- something that historically conflicts with achieving the highest returns from early-stage investing (see chart). Although balancing near-term and long-term expectations is tough, it's not insurmountable. With stage-diversification and patience, "invest in ourselves" programs like this can deliver great results. Hamilton Lane manages similar programs for multiple states across the country and they seem to understand the value of mixed early-stage and later-stage investments to achieve blended success.

Although their website hasn't fully launched yet, you can see their splash page at http://www.floridagrowthfund.com/. It includes email and phone contacts. If you learn more from your interactions, share with other Florida entrepreneurs by commenting here...

Venture Capital Syndicates

noreply@blogger.com (VC Dan) — Wed, 15 Jul 2009 18:17:00 +0000

I've written before about how tough markets like this really separate the wheat from the chaff within a company. As if your company were a foxhole, you get to see who stays to fight by your side and who runs to another foxhole with more protection; or worse, who runs away from the fight altogether looking for a safe desk job far from the battlefield.

My past posts were more about people within a company, but a similar test of commitment happens within investor syndicates. Most entrepreneurs I've met focus on picking their lead investor, but spend little attention on the long-term strength/weakness of the syndicate that forms around that lead. As an investor that typically leads deals, Inflexion spends considerable time and diligence architecting the syndicates in our deals. Most of the time, we select investors we've built companies with before, but every now and then we partner with a fund for the first time. That requires a bit more diligence and we look for, at least, the following four things:

1) Value-add: Relevant investing or operating experience for the opportunity. Beyond the dollars, syndicates are about bringing value-add to a portfolio company thru experience and relationships.
2) Congruence: A POV on the opportunity that's consistent with the entrepreneur and lead investor. Although a quality syndicate requires diversity of experiences and networks, divergent views on the "big opportunity" can be a huge time/resource sink.
3) Dry Powder: A fund size, age and reserve philosophy that suggests they won't get "over their skis" prematurely. We'd rather a co-investor put in less money up front and reserve appropriately (2X-5X), than go heavy early, leaving little dry powder for critical later rounds.
4) Consistency: A track record of consistent operating and financial decision-making. A co-investor that provides inconsistent guidance can wreak havoc at a board level, and a hair-trigger between greed and fear will whipsaw entrepreneurs and co-investors alike. In the unpredictable world of early-stage venture capital, co-investor consistency is an absolute must.

There are plenty of other factors, like investing style (west coast vs. east coast, home-runs vs. doubles), but those four are at the top of my list. I only want investors in my foxhole who will add significant value beyond their dollars, see the same "big opportunity", reserve dollars to play when entrepreneurs really need them, and behave in a consistent manner we can rely upon -- particularly in tough times. I don't always get that mix right, but it's my job as lead investor and commitment to my entrepreneurs to try.

Dystonia Cure Within Reach for Tyler's Hope

noreply@blogger.com (VC Dan) — Thu, 11 Jun 2009 18:35:00 +0000

I've blogged here before about Tyler's Hope and wanted to share a big day for Tyler and his family. This morning CNN.com posted the video below and TylersHope.org is getting bombarded with people wanting to help find a Dystonia cure. How can you help?

1) Watch this video;

2) Learn more at TylersHope.org;

3) Join the Tyler's Hope Facebook Cause; and

4) Help Tyler find a cure by giving and inviting friends to help!

Tyler Staab is a classmate of my daughter's and I'd personally appreciate anything you can do to help...

When Marketers Collude, Bloggers Lose

noreply@blogger.com (VC Dan) — Wed, 03 Jun 2009 19:39:00 +0000

As an active investor in social media, I've followed the Word of Mouth Marketing Association (WOMMA) since it's founding by a handful of marketers back in 2004. The growth of marketers in the organization is a testament to the power unlocked by consumer generated content. The core of that power rests with the content creators such as bloggers, podcasters, vloggers and even to the granularity of social network participants. I think WOMMA understands that, but I fear they've been led astray by a minority of marketers who want to dictate payment terms when engaging bloggers. Sure, they want the exposure bloggers can deliver, but they only want to pay bloggers in free markers, coffee mugs, products, trips and passes.

Normally the market would sort that out, rewarding marketers who recognize the value of bloggers and weeding out those looking for free product reviews. Unless, of course, the largest marketers band together to declare that barter (non-cash) is the only allowed means of transaction. That's what recent WOMMA Code changes are attempting to do: declare that cash is not allowed, whereas non-cash is fine -- even with the exact same level of authenticity and disclosure for each transaction.

As you'll see in the comments below, I disagree with that stance from many perspectives. I feel that cash and non-cash transactions carry equal levels of conflict, but with authenticity and disclosure they can both deliver win-win-win for bloggers, marketers and readers. WOMMA is currently accepting comments on the topic and I've provided my comments below. Agree, disagree? Do you think it's appropriate for marketers to dictate terms to bloggers in this way? Speak now or don't complain when future sponsors say "I'd love to compensate you for your published feedback, time and effort, but my industry association won't let me...how about a branded coozie?"

--------

Dan Rua
June 3rd, 2009 at 12:48 | #3
Reply | Quote
As a marketer, blogger, and WOMMA stakeholder (via IZEA investment) I’ve lived this topic firsthand from many perspectives. To share those experiences as clearly as possible (and to enabled threaded dialogue), I’m providing separate comments from each view. From all perspectives, I believe the WOMM market and its participants are best served by allowing and requiring the same standards for cash and non-cash compensation in WOMM campaigns.
To start, as a marketer, I believe even your topic “Paid Blogging: Ethical or Not” misses the point. WOMMA’s code already allows “paid blogging”, so long as payment is done indirectly via products, gifts, passes, trips etc. Therefore the real question is whether advertisers who do it directly via cash should be held to a different standard than those who shroud their compensation in non-cash forms. So long as both advertisers follow WOMMA’s Honesty ROI, I see no reason for such a distinction other than to protect the “old guard” who have built their agency businesses on shrouded influence and compensation. Let’s embrace and encourage transparency of all forms of compensation.
Likewise, I believe a cash vs. non-cash distinction creates an inappropriate “caste system” between advertisers with large-ticket items and those with small-ticket items. For example, the recent “Bloggers at Sea” boondoggle arranged for a group of large and small bloggers such as Kawasaki, Scoble, and Sernovitz to visit the USS Nimitz is a free trip worth thousands of dollars and probably an experience of a lifetime. There is no way one can argue posts about the trip are not paid blogging — typically without disclosure of free airfare etc.. However, the owner of a free content website has nothing of that value to exchange for similar blogger coverage. Why should the former be allowed “paid blogging” when the latter is not? Those agencies wielding free gifts to provide such as cars, electronics, consumer goods etc. may not like it, but cash gives everyone a shot at social media coverage — something WOMMA should support.
Finally, cash and systems based upon cash rather than manpower can be more efficient, delivering ROI in a social media world that still struggles with unlocking marketing ROI. I’m sure there are some who might claim non-cash compensation delivers better ROI, but who’s right in a specific case study doesn’t really matter. The question is whether WOMMA should foreclose an approach, assuming Honesty ROI is followed, while the industry is still so young and in need of creative solutions. Like cash-based sponsored content today, cash-based sponsored search ruffled the status quo when Overture/Yahoo and Google leveraged it to deliver better ROI. Sponsored search is arguably the most successful online business model ever, powering all of the innovation at Google, Yahoo and much of the online ecosystem. Imagine if the largest trade association of the time had disallowed it before the world realized its potential? As a beneficiary of those innovations, I believe such a move would have been short-sighted and, frankly, tragic to the future of the medium.
Thanks,
Dan (Marketer)
Dan Rua
June 3rd, 2009 at 12:49 | #4
Reply | Quote
As a blogger, I also believe the distinction between cash and non-cash paid blogging is inappropriate. So long as I blog with disclosure and authenticity (including follow all FTC guidelines), I don’t believe it’s appropriate for marketers to collude on the terms I’m allowed to charge for my time, effort and publication. If I’ve built an online media business that is worth $1,000 in goods/freebies/trips, it’s equally worth $1,000 in cash. Coordinating marketers to disallow the latter payment terms is tantamount to price-fixing.
Given discussions I’ve had with other bloggers, it’s obvious to me that cash/non-cash distinctions in WOMMA weren’t driven by bloggers. Depending on the product or service in question, bloggers will decide what’s appropriate for their blog/audience, but they almost universally agree that cash (with transparency) should be one of many valid options.
I believe the closest analogy for the majority of bloggers is talk-radio hosts - even more obvious as bloggers do podcasts & videos. Like most bloggers, talk-radio hosts are more discussion-starters and entertainers than journalists. They grow their audience by topic, geography and/or talent. Some are small-town voices that wouldn’t be recognized elsewhere and some are national celebrities. However, they almost universally accept cash and non-cash payment from sponsors — mostly cash — to speak in their own voice about the sponsor. The FTC allows this radio model, even without disclosure, so why in the world would we handicap radio’s online counterparts with an arbitrary distinction between cash and non-cash sponsorship even when Honesty ROI is followed?
Thanks,
Dan (Blogger)
Dan Rua
June 3rd, 2009 at 12:56 | #5
Reply | Quote
As a WOMMA and industry stakeholder, I believe dictating non-cash terms is inappropriate, unnecessarily risking the industry, the association and it’s members in one fell swoop.
I’ll start with the most dangerous risk: trade association antitrust. In the interest of brevity, this DOJ speech (and multiple related guides) provides a decent summary of Trade Association Antitrust risks: http://www.usdoj.gov/atr/public/speeches/0106.htm One example in that speech is US vs. Association of Retail Travel Agents, whereby the association attempted to dictate pricing terms and transaction structure. Similar to current WOMMA “stand against” language, members of the association boycotted doing business with any providers who didn’t meet their pricing structure/terms. The DOJ’s view was as follows: “This is the kind of trade association activity that is of serious competitive concern. ARTA developed a position for its travel agent members on the prices and terms upon which they should be compensated, and then invited and encouraged members not to deal with travel providers that did not follow its prescription. This amounted, in effect, to an invitation to engage in price-fixing.”
The penalties for such trade association activities can be severe (up to treble damages) and can extend to collaborating members. As such, setting all other arguments aside, I believe disallowing US legal tender in a social media marketing transaction puts the association and members in unnecessary legal jeopardy. I believe WOMMA probably understood this at it’s founding because it’s own 2004 antitrust guidelines specifically state: “Since both the Sherman and Federal Trade Commission Acts prohibit combinations in restraint of trade and since an association by its very nature is a combination of competitors, one element of a possible violation is already present. Only the action to restrain trade must occur for there to be a violation.” It may be understandable that WOMMA accidentally wandered into antitrust territory by competitive members, but now that multiple members have raised the question, the association won’t be able to claim ignorance. Therefore, I believe WOMMA should immediately remove any pricing structure/terms distinctions in the code.
Although I’ve already covered the industry risk for disallowing a young, promising marketing model; as a WOMMA stakeholder, I believe there is another industry risk at play: wasted association energy/resources. The WOMM industry will be better served helping everyone understand compensation and conflict exists whether payment is cash or shrouded in non-cash forms. The FTC makes no distinction between the two and, in fact, recent FTC Guide updates added specific examples for social media non-cash transactions to make their concerns clear — all compensation and conflicts must be disclosed. There are multi-billion dollar industries, such as social media affiliate marketing, that will not abandon cash payments, but could be encouraged by WOMMA involvement/cooperation to increase transparency. Focusing WOMMA’s resources on driving Honesty ROI across all social media marketing will serve the industry far greater than drawing arbitrary lines on an unsettled topic that, by your own words, “is driving strong points of view on all sides.” Find common ground within your membership and focus WOMMA’s scarce time and dollars where we can agree…
Thanks,
Dan (WOMMA Stakeholder)

Spymaster Game on Twitter

noreply@blogger.com (VC Dan) — Fri, 29 May 2009 17:44:00 +0000

An area I've been digging into lately, Twitter Games, got a boost today with the launch of http://PlaySpymaster.com -- created as a "side project" by the iList team. First impressions are good, quality implementation, but I wonder how the tweet noise will impact users as more games hit the stream. Luckily SpyMaster is early so game-fatique hasn't set in...yet.

Strength in the game comes from the size of your "spy ring" so if you'd like to join the fun comment here or follow/@ me on twitter.

Top Tech Trends 2009 and Beyond

noreply@blogger.com (VC Dan) — Thu, 21 May 2009 21:19:00 +0000

Rafe's coverage of the Churchill Club Top Tech Trends is worth sharing.

Jurvetson's observations about distributed search are very similar to some I've been investigating. For every explicit action people take on the web (e.g. creating a link that GOOG indexes), there are 10X+ implicit actions (e.g. browsing, scrolling, video abandons) that are not being indexed for intelligence today. There are distinct efforts happening within content indexing, social feeds and webmaster analytics (largely implicit action data) that, when combined, will deliver maximum search intelligence. Much of the "Real-time web" excitement around Twitter, FriendFeed, Facebook and others still focuses on explicit actions (e.g. status updates), but the best value will come from the real-time, socially-curated, implicitly-indexed web.

What are your thoughts on the 12 trends highlighted below?

Silicon Valley VCs don't want Obama's money, think Google is passe
by Rafe Needleman (via cnet)

I always enjoy wild hand-wavey prognostications about the future, so I was pleased to attend the 11th annual Churchill Club Top Tech Trends event last night, moderated by my former co-workers from Red Herring, Tony Perkins (now running Always On) and Jason Pontin (publisher of MIT Technology Review). Of the 12 trends, two really made me take notice. Most of the rest, which you can see at the end of this story, were pretty standard projections from existing market circumstances.

Trend prognosticators, left to right: Tony Perkins, Vinod Khosla, Steve Jurvetson, Ann Winblad, Ram Shriram, Joe Schoendorf, Jason Pontin.
(Credit: Rafe Needleman/CNET)
Interesting trend #1: Centralized search will fall
Venture capital whiz-kid Steve Jurvetson gave an impassioned pitch for this trend, which he called, "The triumph of the distributed Web." He said the aggregate power of distributed human activity will trump centralized control. His main point was that Google, and other search engines that analyze the Web and links, are much less useful than a (theoretical) search engine that knows not what people have linked to (as Google does), but rather what pages are open on people's browsers at the moment that people are searching. "All the problems of search would be solved if search relevance was ranked by what browsers were displaying," he said.
Jurvetson believes that the future is "federated search," in which the Web's users don't just execute search queries, they participate in building the index by the very act of searching, immediately and directly.
What I find most interesting about this concept is that we can see it already happening, although via a different technological vector. Twitter Search is real-time search. It tells you what people are saying right now, and on popular topics, it gives you far more current information than Google. I think Twitter Search also shows us that Jurvetson's vision of search, while compelling, is incomplete. To get the real-time wisdom of the crowds for the purpose of search, you have to know not just what Web pages people are displaying, but exactly what is on those pages, and you probably also want to know what's showing up on users' computers in apps other than the Web browser.
I am not sure the Web's users will want to participate in the creation of this search engine, nor am I convinced that there's a lot of value in the concept for obscure or "long tail" search queries. But the idea is interesting, and I certainly agree that the value of real-time searching, as well as social-network-aware searching, will increase dramatically and quickly.
Interesting trend #2: Washington D.C. will prove to be a poor VC
Moderator Jason Pontin, a self-described liberal who "finds our president as dreamy as the next man," broke party rank and echoed a popular sentiment in the room of wealthy (and traditionally mostly Republican) venture capitalists, to say that the Obama administration's plan to invest in new technologies is doomed to fail. While acknowledging that the administration's heart is in the right place, he pointed out that traditionally, direct investment in technology by governments doesn't work out well. He said the United State's subsidies on ethanol, France's decision to skip the Internet in favor of the state-sponsored Minitel, and Japan's direct investment in supercomputers as it tried to spend its way out of a recession were examples of poor investments. "Government is a particularly poor judge of new technology," he said.
Other panelists agreed, including the strongly Republican co-moderator Tony Perkins. Panelist Joe Schoendorf of Accel said, "The VC model works. Tech doesn't need more capital." (Of course, nobody wants the government moving into their turf; Accel is a venture firm.)
While I agree that best role of government, when it comes to new technology, is to encourage ends and not directly fund means (you can encourage energy independence in general without paying for particular technologies), it's not always the case that government can't play well in this field. The CIA's venture firm, In-Q-Tel, for example, actively fosters the growth of start-ups, and many of the technologies developed on those dollars have national security as well as economic benefits. In-Q-Tel portfolio company Ember, for example, has contributed to the development of the ZigBee wireless standard that will end up in the next generation of smart appliances.
Panelist Vinod Khosla's earlier trend, "Maintech not Cleantech," was in the same vein. Khosla doesn't think government subsidies will drive down carbon emissions. (He also thinks that "fringe" environmentalists don't make much of a dent. "Five percent of Californians will buy anything," he said, referring to the Prius.) Khosla's money is where his mouth is: His "renewable portfolio" has funded companies working on fuel technology, engines, building materials, and plastics. "Nobody wins betting against Vinod," panelist Ram Shriram said.
All the trends
1. The millennials are here. Everything changes. The current generation of graduating college students won't remember a life offline.
2. Advanced batteries will be most popular energy investment in '09 and '10 and will provide best returns in the medium term.
3. A deluge of unstructured data creates the next great information leaders. ("The dark matter of the enterprise is unstructured data," said panelist Ann Winblad.)
4. Wireless broadband will be one of the only IT sectors to see increased funding this year and in the future.
5. Maintech, not Cleantech
6. Power and efficiency management services will see a flowering through investment and innovation.
7. The triumph of the distributed Web. (This is Interesting trend #1.)
8. Health care administration will be the fastest-growing sector. (The panelists were so bored by this trend they didn't even discuss it.)
9. Consumption of digital goods on mobile devices is the growth story of the coming decade.
10. Electronic displays will prove the hottest investment in hardware this year and next.
11. Washington D.C. will prove to be a poor VC. (This is Interesting trend #2.)
12. The rumors of the demise of the reporter have been exaggerated.

NVCA Four Pillar Plan to Restore IPO Market

noreply@blogger.com (VC Dan) — Wed, 29 Apr 2009 14:13:00 +0000

The National Venture Capital Association (NVCA) annual meeting kicks off today with a great mix of sessions and speakers. At a policy level, NVCA Chairman Dixon Doll is also announcing a four pillar plan to help increase liquidity via IPOs.

Pillar I - Ecosystem Partners: consolidation and attrition has limited the number of mid-tier accounting/legal/i-banking firms who can help smaller companies reach the public markets -- at least at a manageable cost. The NVCA is encouraging a new set of ecosystem participants and partnering with the largest players in the industry to do the job better.

Pillar II - Enhanced Liquidity Paths: The NVCA is endorsing alternative distribution between buyers and sellers that grows buyers and their commitment to holding long-term. One example provided was Inside Venture, which pre-screens cross-over investors who agree to hold long-term.

Pillar III - Tax Incentives: From globally competitive capital gains rates, to carried interest taxation, to one-time IPO-related tax incentives; the NVCA advocates a suite of tax initiatives that will encourage investment and company growth.

Pillar IV - Regulatory Review: Sarbanes-Oxley and a host of other regulatory moves have created various unintended negative consequences and costs for smaller venture-backed companies. The NVCA advocates a tiered approach to regulation to recognize the different circumstance of large and small public entities.

The full NVCA presentation can be viewed below. It contains a good set of data behind these recommendations, including the impact venture-backed companies have on our economy (12.1M jobs created).

NVCA 4-Pillar Plan to Restore Liquidity in the U.S. Venture Capital Industry

View more presentations from NVCA.

Investor Pitch: Excite, Engage & Exit with the Ask

noreply@blogger.com (VC Dan) — Fri, 27 Mar 2009 18:32:00 +0000

I've recently been coaching some entrepreneurs presenting at upcoming investor conferences. It's something I've done for years and still enjoy. I remember the first investor pitches I gave and the first I heard, and can appreciate how "blind" many entrepreneurs are flying when doing their first investor presentation.

Although my advice is always tailored to the entrepreneur and company at hand, there is one nugget I try to share with all. Remember the goal of your presentation and don't wander too far from it. In most situations, the goal is to Excite, Engage & Exit with the Ask.

Excite: Focus on what is most exciting about you and your business. Don't get bogged down in re-hashing your business plan. If your technology is truly disruptive, make that point clear. If your team brings significant experienced or unique relationships, hit that. If customers are seeing immediate ROI from your products, put that front and center. Your number 1 job in an investor pitch is to generate excitement, preferably very early in your presentation. Getting audiences to shift forward in their chairs and pay attention is much more important than hitting the "textbook" areas of business analysis.

Engage: If the forum is a conference, then Engage means to deliver your message in a way most people will understand. Ditch the technical jargon and provide real-world examples of creating value for customers. If there is a unique pain point for your customer, share that story because it could evoke immediate understanding/emotion from your audience. If the forum is a partner meeting, then also look for opportunities to bring the audience into a discussion. Ask "how often X has happened" to them, their companies or their families -- something you fix. Ask about the firm's approach to investing so you understand them better and can relate to that in your presentation. Do something to drive two-way discussion -- a partner meeting presentation that goes one-way is almost always deadly.

Exit with the Ask: Always, always, always end with a slide that details what you're asking for or proposing. Don't douse audience excitment with a dead-end close. You need to funnel the audience's interest in your presentation into a decision point. Note, however, that the ask isn't always just an investment amount. To the contrary, the ask at a conference may just be to get audience members to your booth for further questions. The ask at a partner meeting typically involves a dollar amount, but also includes understanding process "next steps" -- driving due diligence or a subsequent meeting. By presenting your Ask to an excited and engaged audience, with your key Ask, you've maximized your chances for success. At the worst, making the Ask will help you avoid wasted time. If you didn't excite the listener and they don't react to your Ask, it's a good sign to improve your pitch and focus your energies on your next prospect.

Related posts: steve tennant, don dodge, wil schroter, matt ridenour

Highlight NoFollow Links: Chrome "Plugin"

noreply@blogger.com (VC Dan) — Thu, 12 Mar 2009 15:46:00 +0000

The combination of Google Chrome's speed and a fatal Firefox bug has converted me to Chrome full-time. The biggest loss of such a switch is my treasure chest of great Firefox plugins.

Unfortunately Chrome doesn't offer plugins yet (actually, they do for select parties found via this Chrome URL hack), but there is a close approximation for many needs: bookmarklets + javascript. In fact, there's a site offering various Chrome "Plugins" using this approach: ChromePlugins.org. That was a really savvy domain/focus -- thousands of Chrome plugins seem inevitable long-term and the site is well positioned for that future.

I've pulled multiple plugins from that site, but one was missing for exactly my needs. I wanted a plugin that would highlight nofollow links, not just the text, but the background of the text -- for easy viewing across sites with diverse text colors. ChromePlugins had a plugin that changed text color to red, but sites like ReadWriteWeb (image above of pagerank passing paid links) already color their links red. Therefore, I tweaked the code to highlight nofollow links with a yellow background (and red text). The code is below:

javascript:var%20t=document.getElementsByTagName('a');for(i=0;i<t.length;i++){if((t[i].rel.toLowerCase()=='nofollow') | (t[i].rel.toLowerCase()=='external nofollow')){void(t[i].style.color='red');void(t[i].style.background='yellow');}}

To install it, you only need to drag this icon to your Chrome bookmarks bar:

Let me know how it works for you...

UPDATE: I received a great suggestion in the comments, to also highlight 'external nofollow' links. I've updated the javascript to do this. If you grabbed the prior, just delete it and drag the current icon of my face to your bookmark bar.

My Year of Firsts: Skydiving, Half-Marathon, Now What?

noreply@blogger.com (VC Dan) — Fri, 06 Mar 2009 22:17:00 +0000

Any of you that are friends via Facebook or Twitter may have seen that I started the year with my first skydive. It was a once in a lifetime experience I'd recommend for everyone.

Then, a couple weeks ago, I ran my first half-marathon. One of my entrepreneurs (Ted Murphy) and I chose Gainesville's Five Points of Life Race Weekend as a joint training goal. I'm happy to say that my half-marathon went better than I expected (beat my goal by 5min) and it was sure nice sharing the experience with my wife, my girls, Ted and his better half Tara. As you'll see in the video below I snagged from Ted, he also finished strong, completing his first marathon. Congrats buddy!

Following the race, my wife asked how I was going to follow-up January and February, with another "first" in March. That's a good question. Via twitter I've received ideas as varied as running the bulls, ballroom dancing, and hiking the Appalachian Trail. However, it's gotta be something I can squeeze into weekends. What do you think, if I could knock off a "first" each month this could definitely be a year to remember! Ideas please...also, please don't call this my "bucket list" -- I am getting old, but give a guy a break...

Google Antitrust Violations

noreply@blogger.com (VC Dan) — Thu, 19 Feb 2009 16:03:00 +0000

A recent truemor about Google's antitrust risk under the Obama administration raises what could become the most important technology topic of Obama's administration. That may sound melodramatic, but as all citizens and businesses grow more dependent upon the internet so too does Google's power grow to impact the lives and livelihoods of the world. It doesn't hurt that Obama's pick to head antitrust, Christine Varney, considers Microsoft "so last century" and Google a monopoly.

Just today, B2B search engine TradeComet.com has filed suit against Google, accusing them of violating antitrust laws. I'm not sure this is the suit that seals the deal, but TradeComet claims:

"With no notice, Google changed from cheerleader to tyrant when it realized we were a competitive threat," said TradeComet founder and chief executive

"For example, Google raised my prices by 10,000 percent, which strangled our business, virtually overnight," he said. "As a result of Google flexing its monopolistic muscle, SourceTool.com currently averages about one percent of the traffic it previously had and is no longer a competitively viable business."

Google responded with a now-familiar claim:

"the advertising market in which Google operates is highly competitive, and advertisers have a huge range of choice"

That response has worked before, but won't for much longer. You see, by pointing at the broad advertising market, Google tries to hide the fact that it also operates in the search and search advertising markets; both markets in which Google's monopoly power grows daily. That's analogous to 1990s Microsoft claiming they operated in the highly competitive "software" market, to distract from their monopoly in the "operating system" market which they used to stifle competition in browsers and other related markets.

The real competition is for searchers and search advertisers -- two areas where Google wields monopoly power. Google has taken multiple actions against companies, webmasters and individuals trying to reach searchers and search advertisers that Google controls. Often Google claims such actions are necessary to maintain "search quality", just as 1990s Microsoft claimed that bundling software delivered a better quality end-user experience -- the government didn't buy it. Those claims will also break down for Google -- particularly because much of the targeted competition delivers exactly what searchers are looking for, relevant sites, undermining "search quality" as an excuse. It also doesn't help Google's case that their actions are taken in such secrecy, with many competitors left wondering what happened and why and searchers often oblivious to their loss of choices.

I can't predict when the antitrust charges will stick or what the remedy will be (breakup, new biz practices, mandated transparency), but they will. I'm not a big fan of antitrust rules generally, but I do believe everyone should play by the same rules -- even if they are major donors to Obama. It's only fitting that Google play by the same rules that allowed them to reach their dominance -- if Microsoft had been allowed to dictate browsers and search destinations instead of fighting antitrust regulators, Google would just be another funny word today...

CEO Patriot Pledge: Interesting Idea, Bad Math

noreply@blogger.com (VC Dan) — Thu, 12 Feb 2009 15:51:00 +0000

Bob Rosner over at CNBC has suggested the following CEO Patriot Pledge:

As an executive my primary motivation is to act for the good of my company, not just my own financial gain. No one at our company will earn a guaranteed base salary more than 40 times of our lowest paid worker and we will offer the same health care and 401(K) matches to employees as we do for executives. We support pay for performance, so when our company’s performance serves investors and employees, we’ll share in the gains. When our company’s performance does not adequately serve our investors and employees, we’ll share in the sacrifice.

Bob claims that inappropriately high executive compensation is a ripe source of capital for employing more people. The general idea of CEOs aligning their comp with company performance is great, but Bob's supporting examples, conclusions and resulting pledge are seriously flawed.

The prime examples Bob uses for CEOs doing it right and wrong are Tom James of Raymond James Financial and Robert Iger of Disney. I'll start by saying I've had the opportunity to meet Tom James and I'm a big fan of his, as an entrepreneur and a manager. I've never met Robert Iger, but I also know you don't get to his level without creating value on many levels.

Bob quotes James's $325K base salary, less than 20 times the salary of RJF's lowest paid employee. He then quotes Iger at $51 million, but that looks like total comp -- various sources quote Iger's base salary as $2,000,000. That exaggeration, however, is just a small piece of the bad math at play here.

James owns over 13 million shares of Raymond James, or about 11% of the company -- not including any additional shares he may have in various family trusts. That 11% is worth north of $250 million! This is a high % for a CEO of a multi-billion dollar enterprise; but that's what you get when a CEO was also the founder.

Iger, on the other hand, was not the founder of Disney and his total package reflects this. He owns just 576K shares of Disney, or about .03%. That's worth about $10 million.

Given the huge disparity between their ownership positions, 11% vs. .03% (a 300X disparity), let's consider what happens when they create shareholder value. When James creates 10% of shareholder value, he creates about $230 million of total shareholder value, and his personal shareholder value grows by $27M. When Iger creates 10% of shareholder value, he creates about $3.9 billion of total shareholder value, but his shareholder value grows by just $1 million! No wonder non-stock compensation is so different for those two CEOs, demonstrating why base salary is a terrible measure for comparing CEO comp packages and as a litmus test for CEO/company "patriotism".

It's also worth noting that the arbitrary 40X ratio (CEO base salary vs. lowest employee base salary) is equally wrong-headed. If the goal is aligning interests of employees and shareholders, then pay should relate to the employee's potential to impact shareholder value. The idea that the least-paid employee at Disney is responsible for 1/40th the shareholder value as the CEO strains reason. I'm a big believer in employee empowerment up and down an organization, but the reality is that CEOs of large corporations impact shareholder value at a scale orders of magnitude larger than the least paid employee. I like to think I was a talented, underpaid young engineer when I started at IBM, but I didn't come close to creating the $180 billion of shareholder value Lou Gerstner did over his tenure. Understandably, comp packages mirror that real-world responsibility and disparity of impact.

(Pre-emptive comment: Remember, I like Tom James and I don't know enough about Robert Iger to form an opinion of his skills. They were the examples Bob used and my math relates to the shareholder value at stake for their positions and relative ownership. I'm also a strong believer in performance-based compensation, just not when it's driven by arbitrary comparisons to other employee salaries rather than driven by shareholder value responsibility. If people create value, they should earn more and if they destroy value, they should earn less -- the magnitudes are all relative to the responsibility they hold and the market price for their skills.)

Twisten: Listen to Twitter

noreply@blogger.com (VC Dan) — Wed, 04 Feb 2009 23:36:00 +0000

Did you know you can listen to Twitter? Yes, listen -- or better yet, twisten. Thanks to yet another innovation from the script kiddies over at free music monster Grooveshark, you now can. The idea reminds me of Coke's old commercial "teach the world to sing in perfect harmony," with Twitter as the grand stage.

All the songs good enough to tweet

Twisten.fm allows you to easily share songs and constantly scans the twitter stream, looking for songs people have shared via tinysong or other tweet tools -- those song-sharing tweets are counted as "twistens". Those twistens are then listed at twisten.fm, organized as tweets by yourself, friends or everyone. As usual for anything Grooveshark, the site has a nice, clean design.

Play on-the-fly

However, twisten.fm isn't just a list of songs you should go find. You can actually click a PLAY arrow on every twisten to listen on-the-fly. You can also click the tinysong link, to play it via listen.grooveshark.com. That's what I do when I find something I like, because I can then click "Autoplay" to get an ongoing stream of similar music.

Additions I'd like

The service has barely even launched, but I've already got requests that I either missed or I'd like to see added. First, I'd like to see some popular lists, built from twisten votes. Similarly, I think a leaderboard of twisteners could encourage sharing and explode Grooveshark's growth. I'd also like Autoplay built-in to twisten.fm so I could listen to a continuous stream of shared songs, maybe prioritized by twisten votes.

Even without these additions, twisten.fm is a compelling, new service creating value from the intersection of Twitter and Grooveshark. Twisten should accelerate Grooveshark's already impressive growth, but could be a powerful service in it's own right: twitter, for music. Great work, G-crew!

Oh, and when you share your first twisten, don't forget to thank @danrua for the heads-up ;-)

Oh, oh...and here's that Coke commercial, just in case I lost you from the start...

Spread the Wealth: The Gasparilla Experiment

noreply@blogger.com (VC Dan) — Fri, 30 Jan 2009 12:35:00 +0000

In honor of FAQFriday, this post is about a bunch of questions our society wrestles with daily. I hope the example I share doesn't trivialize the magnitude of the questions...although I usually try to answer questions on FAQFriday, I'm the one asking today -- and I expect some answers!

Last weekend my family drove down to Tampa to see the Gasparilla Parade (there's another next weekend). Having grown up in Tampa, attending the parade is a 30+ year tradition for me and we always have a great time. This year was a bit different, though. Both of my daughters had the opportunity to walk in the parade so my wife and I watched with our extended family. We had a blast, but without my daughters sitting with me I found myself paying closer attention to the capitalism vs. socialism struggle around parade seating.

You see, my family has always been the type to arrive early (10am) and create a great viewing area for the parade (3pm). Because we arrive early, we reserve parade-side seating in a chair-encircled area about 10 feet deep and 20 feet wide. We set out lawn chairs, blankets and coolers in anticipation of a full day of family, floats and fun -- and beads!

If you've ever been to a parade as well attended as Gasparilla (half-a-million people), you may sense where this is headed...

Between 10am and 1pm, thousands of other parade goers arrive and follow the same tradition, with chairs, blankets, coolers, and family -- creating a crowd of 50,000 about one-family deep along the entire route. I'll call this group the "early-arrivers" class because they sacrificed their morning, arrived early and created a comfortable space for their families.

Then, between 1pm and the parade's 3pm start, the other 450,000 people show up. I'll call this group the "late-arrivers" class. The earliest of these are probably a "middle-class" of parade space who don't get front-row seats, but still have decent space in between the early-arrivers and late-arrivers flowing in as the parade starts.

So what do you think happens?

First, the late-arrivers almost immediately start swallowing the middle-class because of their sheer numbers and because the middle-class didn't arrive early enough to secure their space from plunder. That equalizes and aligns everyone off-street, envying the prime space held by the early-arrivers -- even though the floats are large enough to be seen by all classes and there will be more parade beads thrown, to all classes, than anyone cares to keep. Then, for the rest of the parade, it's open class warfare as the late-arriver masses slowly consume the prime viewing areas created by the early-arrivers.

It starts with the late-arrivers trotting out their saddest cases for "spreading the wealth" -- their smallest kids. This is a very successful tactic, as most early-arrivers voluntarily reduce space for their own kids to pack the curb with the newcomers -- even though it significantly alters the experience from a comfortable family gathering. Then, once their kids have space, the late-arriver adults either wedge themselves behind/beside their kids or they begin the drum-beat of "spreading the wealth" with others -- full-scale class warfare is at hand. While some battle with words, many others physically start moving chairs, coolers, blankets to take more space. As some do it, it emboldens others until...eventually...the wealth has been spread to all. The parade ends with the late-arrivers having equal (sometimes better) space as the early-arrivers and the early-arrivers trying to find the lid to their cooler that was successively kicked behind the masses.

Although we had a great day watching the parade, catching beads and seeing our girls walk by in the parade (they actually missed us because they didn't recognize our mixed group of family and late-arrivers), this social experiment was really intriguing to watch unfold. It crystallized, for me, a few observations and questions about society:
1) Why do the late-arrivers feel this is "OK" or appropriate behavior to teach their kids? What do kids from each class learn from it?
2) How would it all change if parade goers weren't just splitting confined space, but early-arrivers actually "created" space by their arrival (more analogous to how entrepreneurs create jobs and wealth in society)? Would the late-arrivers feel any more or less entitled to equal space?
3) Does any of this feel different if we just change the labels from "early-arriver" to "rich" and "late-arriver" to "poor"?
4) How would it all change if there was a governing entity who announced that the early-arrivers were expected/required to share with the late-arrivers -- the more you have, the more you have to share? Would it reduce the number of early-arrivers? Would it cause late-arrivers to be even more brazen in their takeover, because the "spread the wealth" mindset was sanctioned from above?
5) What would happen if everyone, early and late arrivers, voted just before the parade started on how to split the space and the majority ruled? Would such a vote alter people's behavior in future years?
6) There will always be more late-arrivers than early-arrivers, it's the nature of people and a bell-curve of personalities.
7) Is this one-day experiment an accelerated view of what brings down societies over hundreds or thousands of years? Is "parade day" coming for the world, with its own distribution of "early-arrivers" and "late-arrivers"?

Burnham Institute Update

noreply@blogger.com (VC Dan) — Thu, 29 Jan 2009 11:00:00 +0000

Guest Post by:

Mike Schmitt, MD

Life Science Analyst and Editor of the Florida BioDatabase

Mike can be reached at M2Schmitt@aol.com

I had the opportunity to once again attend the Foley Leadership Series sponsored by the Foley Lardner Law Firm meeting held a few weeks back at the CityArts Factory on South Orange Ave. in downtown Orlando. This facility is a way cool place to visit as it’s an old theater (built in 1916) renovated and converted into a number of art galleries on the first floor—complete with a working glass arts studio—and a full size theater on the 2nd floor with adaptability to hold and cater to a fairly large conference group. For those of you into interesting art and architecture—it’s a “must see” and a good reason to visit downtown Orlando.

The conference gave a nice update on current cancer research being conducted at the Burnham Research Institute along with an update of the progress on opening the Lake Nona medical complex (read more in a nice article by Robyn Shelton).

For those of you not familiar with the Burnham Institute for Medical Research, it’s a world class research center originally based out of La Jolla, California with over 600 scientists on staff on the west coast.

They are currently located in a temporary 14,000 square foot space in southwest Orlando, but plan to open a 175,000 square foot facility in the Orlando Lake Nona medical research campus (located between the Orlando International Airport and the University of Central Florida in southeast Orlando).

The institute is still on track to complete “phase 1” and open this April. They currently have around 65 employees and will expand to over 300 employees as the institute goes forward. Although Burnham does research in various biomedical area, the focus here in Central Florida will be on diabetes and obesity—a field that is relatively understudied in the basic sciences. Florida will provide an excellent source of patients for clinical investigation as our State has a fairly high rate of both obesity and diabetes. Current research being done at other diabetes centers around Florida will also provide opportunities for collaboration.

Burnham is poised to become a serious player in the life sciences with easy access to just about any other biotech center in Florida along with being adjacent to a good airport.

It’s good to see the biomedical industry really taking shape here in Florida. California and Massachusetts—take note!

Riskmasters Know How to Prioritize

noreply@blogger.com (VC Dan) — Thu, 22 Jan 2009 14:15:00 +0000

You have probably already heard that VCs love to back serial entrepreneurs, but why is that? What makes them special?

Well, it's a mix of things, but one trait I've witnessed across a decent sample size is the ability to prioritize and reprioritize in a nimble, but thoughtful fashion. All entrepreneurs are risk-takers, but the best are Riskmasters. The skill shows itself early in the life of a company, particularly when founders plan their funding path and use of seed funds.

Given many possible to-dos in the early life of a company, first-time entrepreneurs will often prioritize the easiest items first or focus on developing the full-function product they envision.

Serial entrepreneurs, however, immediately start prioritizing risk reduction. In particular, they focus on the todos that address the largest risks in the business or the largest hurdles to securing institutional funding. Those may be the hardest todos, but they know all other progress is a phantom until the most important risks are addressed.

One of the most effective prioritizations is to realize that first generation products don't have to do everything. In fact, it's worthwhile to ask "what is the minimum the product has to do for a customer to buy or an investor to feel core technology risk has been removed?". Reaching a v1.0 sale is huge for company value creation and attracting investors.

The same holds true for management risk. Investors don't expect a full management team, particularly if it's filled with B players. Serial entrepreneurs prioritize the key hires that are needed to execute the business or secure funding.

Lastly, the same holds true for market risk. If the key question for investors is market size, serial entrepreneurs prioritize data gathering to prove a large market. If the key question is competitive threats, they prioritize functionality or partnerships that provide a unique competitive advantage.

The benefits of this prioritization are multifold, but at least two important outcomes occur early.

1) Seed capital required (and resulting dilution) is minimized because funding isn't required to boil the ocean, but only to accomplish specific risk-reducing milestones; and

2) Institutional investment comes earlier as key risks are removed, providing capital and relationships to accelerate the business sooner.

What are some examples you've seen of Riskmasters, where prioritization simplified execution or fundraising?

FYI: Although I used serial entrepreneurs as an example of a Riskmaster, they can come in all shapes, sizes and experience levels. My former partner Tim Draper (pictured above), who coined the term Riskmaster for entrepreneurs, has started his own blog on entrepreneurship and venture capital. If you haven't already subscribed, you probably should -- the man is smart and crazy, like a fox.

SEBIO Conference: Sharklet Chomps the Shootout

noreply@blogger.com (VC Dan) — Thu, 08 Jan 2009 22:23:00 +0000

Guest Post by:

Mike Schmitt, MD

Life Science Analyst and Editor of the Florida BioDatabase

Mike can be reached at M2Schmitt@aol.com

The annual Southeast BIO Conference (SEBIO) meeting wrapped up several weeks ago in Palm Beach on December 5^th. I was not able to attend due to prior family commitments up north…and by the way—I just returned from a foot of snow in Buffalo—an experience that jogged my memory as to why I live in Florida (I’ll take a jab at my upstate NY friends now, before they once again remind me of hurricane season in June).

Readers may remember I’ve previously written about SEBIO which is a non-profit public/private partnership to promote the development of the life sciences throughout the Southeast.

Florida had 7 companies present at the meeting in addition to having technologies from the University of Florida as well as Florida International University compete in the BIO/Plan Competition.

Of the Early-Stage conference participants (primarily those with no prior institutional funding), 4 of the best companies were selected for an Early-Stage “Shootout” where they had a chance to do a full presentation to all of the investors attending the forum.

I’m happy to say that for the second year in a row, Florida has won the “Shootout” with Sharklet Technologies. I should also mention that both Sharklet as well as last years “Shootout” winner, Transgeneron Therapeuticsare current residents of the University of Florida Sid Martin Biotech Incubator. Transgeneron also appeared at this years meeting as a Main-Stage presenter. Needless to say, this reflects well on Florida and the Sid Martin Incubator—congratz to David Day, Patti Breedlove and Jane Muir!

Sharklet is a biotechnology company that develops and brings to market surface technologies (inspired by the antimicrobial properties of shark skin) that are designed to inhibit or enhance microorganism growth to make the world a healthier and safer place.

“We are delighted to have been selected as the winner of the SEBIO Early-Stage Shootout as the win validates that there is significant interest in Sharklet and a pressing need for an environmentally friendly and no-kill strategy for bacterial control in the healthcare market,” said Joe Bagan, Sharklet Technologies’ chief executive officer.

The BIO/Plan Competition (which is intended to identify and support newly created venture-fundable entities in the life sciences) had 10 finalists this year with 3 involving Florida technologies (a good showing).

This is no small deal as the winner was awarded unrestricted, non-dilutive venture funds (valued at $100,000 in cash and services) to launch the enterprise and implement their business plan.

Here are the 3 from Florida (I don’t think that any of these very early entities have websites yet).

Cardiac BioSolutions: A device company developing revolutionary percutaneous heart valve (PHV) products, such as a more durable artificial aortic valve with the beneficial properties of a natural tissue valve, and a catheter delivery system which can be used with any percutaneous valve (Florida International University).

Ribotheron: A discovery stage company employing hammerhead ribozymes that block replication of herpes viruses I and II as a novel anti-HSV therapy, initially for corneal infections (University of Florida).

NeuroPoetix: A new drug development company that combines insights and advances in stem cell biology and knowledge about the central nervous system (CNS) to significantly progress the development of drugs to treat serious diseases of the brain (University of Florida).

The winner of the BIO/Plan competition was Cerene Biomedics, from North Carolina.

Cerene Biomedics: A device company developing an implantable device to prevent focal epileptic seizures by delivering targeted thermoelectric cooling to the neocortex, anticipated to be first line therapy for many patients suffering from uncontrolled seizures (Duke University).

For the very early stage life science entrepreneurs, it’s time to start thinking ahead as the BIO/Plan application process usually begins in February of each year. Readers can check out further details at the SEBIO website.

Florida Opportunity Fund

noreply@blogger.com (VC Dan) — Tue, 06 Jan 2009 15:13:00 +0000

Despite my time off the grid for the holidays it was hard to miss some of the buzz around the recently announced Florida Opportunity Fund. It didn't hurt that I've been following the topic closely for the last year -- you can imagine it's close to my heart. The origin of the Florida Opportunity Fund stems from legislative action in 2007 creating roughly $30M of capital focused on in-state early-stage venture capital: 2008->Chapter%20288->Part%20X">The Florida Capital Formation Act.

The logistics of deploying that capital properly is that Enterprise Florida was given the responsibility and funding to create a custom fund-of-funds (FoF), including a governing board and professional FoF managers. The governing board was announced back in 2007, including Pete Pizarro, Kenneth Wright, Diane Cook, Paul Hsu, and Andy Hyltin.

The recent announcement covered the selection of its FoF manager: Florida First Partners, a joint-venture between Milcom and Credit Suisse-Customized Fund Investment Group. That announcement essentially signals the Florida Opportunity Fund is open for business and looking for quality Florida-based venture funds to leverage Florida's pool of talented entrepreneurs and world-class technology into superior venture returns. Jennifer Dunham and Melford Carter are the current contact points for inquiries.

So, those are the facts, what's my interpretation?

I think it's another smart step in the right direction. A pool of $30M split among a few early-stage venture funds isn't going to change the state's venture ecosystem overnight. However, I've seen firsthand how quality in-state lead investors bring national venture dollars to the state. For example, Inflexion, Florida's Venture Fund, has experienced 11-18 dollars of co-investment for every Inflexion dollar invested into early-stage companies.

Now that the politicians have taken a key step, setting up the fund with its core goals, it falls to the Florida Opportunity Fund to deliver on those goals, in the face of a difficult macro-environment, plenty of naysayers and likely political pressure along the way. Florida presents unique challenges and opportunities for early-stage venture funds, requiring local access to multiple hotspots across the state combined with national relationships. Early-stage company building is a local business and flying in for periodic board meetings, even by the largest funds in the country who will claim some Florida connection, just doesn't cut it for early-stage.

Local effort + national networks + quality track records = superior investment returns for the Florida Opportunity Fund.

That said, just as Inflexion alone hasn't filled the early-stage venture gap in Florida, the Florida Opportunity Fund isn't a silver bullet. Participation by angel groups, the State Board of Administration and the state's largest university foundations are also critical. However, if we're all successful harnessing the vibrant and passionate technology entrepreneur and research base in the state, it will be a transformational success for Florida both in investment and economic terms.

Budgets: Past Performance and Future Results

noreply@blogger.com (VC Dan) — Fri, 19 Dec 2008 22:18:00 +0000

Almost all investment literature warns you that past performance is no guarantee of future results. That disclaimer usually prompts, for me, a juxtaposition with Einstein's definition of insanity: "doing the same thing over and over again and expecting different results." So, which is it?

I have no idea, but I consider both of these concepts as I review portfolio revenue projections each coming year. We just completed that cycle for our portfolio and I've got a suggestion for every entrepreneur projecting year-to-year -- plan your cash in the new year as if your past performance IS a guarantee of future results. Therefore, if you completely crushed your projections last year, get aggressive this year. However, if you're like most optimistic entrepreneurs, and you didn't hit all your numbers; incorporate that history lesson into your new year.

Project as you might normally do, including your usual expectations of growth. Refine it with your CFO and others. Then, apply a discount based upon your prior year performance. If you only achieved 60% of your revenue plan; apply that same discount going forward. If you were able to run more efficiently last year, only spending 90% of plan; apply that same discount (to the positive) going forward. Don't change your sales teams goals based on these discounts, but manage your cash (and project fundraising) as if past performance will hold true going forward. If you perform even better against your projections next year, great -- you'll have more runway to create value.

Two caveats to this advice are:

1) You should get better over time at projecting, so there is an argument for incorporating that expected improvement so you don't unnecessarily sit on cash. In theory that's true, but you'd be surprised how often the world throws new hurdles at you each year -- so last year's lessons aren't as applicable to next year.

2) Significant changes in how the company operates, it's business model, or it's team; can make a big difference in hitting projections. Again, you could try to factor in improvements from key changes. My advice is not to assume those changes bring only upside -- they often bring new lessons as well.

I'll end by saying I'm a pretty optimistic guy by nature, so it's tough to advocate such a cautioned view. However, I've seen this story too many times -- it's much better to deliver upside surprises to yourself, your board and your investors, than the alternative.

I hoped to incorporate some piece of Fred's recent "Different Results from Doing the Same Thing" post; but the topics were just too different. That said, I'd still recommend reading his post. It dishes some knowledge on bridge financings and the auto industry predicament, all in one insightful post.

Life Science Entrepreneurs Still Shaking the MoneyTree

noreply@blogger.com (VC Dan) — Thu, 04 Dec 2008 15:11:00 +0000

Guest Post by:

Mike Schmitt, MD

Life Science Analyst and Editor of the Florida BioDatabase

Mike can be reached at M2Schmitt@aol.com

Ok, enough already! Amidst all the economic “doom and gloom” from the daily news feeds—I actually do have something encouraging to share (well, at least for the moment until the Dow plunges another 10%).

The National Venture Capital Association along with Pricewaterhouse Coopers released their VC funding update in its recent Moneytree Report for Q3 2008. PWC's MoneyTree is a great site for info on VC investing trends on the national as well as regional levels with the capability to search by industry. Even better yet—it’s free with a simple registration.

It seems that on a national level, VC investments have remained relatively stable (naysayers look out!) through the 3Q of this year at $7.1B. The biotech industry, which had fallen to 3rd place in the 2Q (first time that had happened since 2003) once again reclaimed its top position inching out software by a narrow margin of $1.35B to $1.34B. The medical device segment placed 4^th at $864M, giving the overall life science sector (biotechnology and med device combined) a relatively strong $2.21B (and represented a 10% increase from the 2Q). This brings the 2008 total for all categories (through 3Q) to $21.6B and is on track to be in the same ballpark as 2007 when VC investments were $29.4B for the year.

The life science industries do tend to be more resilient in difficult economic conditions—after all, people don’t stop getting sick and we still need to treat their illnesses. But in this market—anything can happen. When the ultra-conservative stock of Berkshire Hathaway moves up or down by more than 25% in a single day—you know we are not in ordinary times—and no company is immune to the current market conditions.

Can we expect more good news or will VC investing get hammered by year end? PricewaterhouseCooper’s managing partner, Tracy Lefteroff does not expect funding to dry up. “VCs have slugged through difficult times before and this one should be no different.” Personally, I’m not so sure. Stay tuned for the 4Q follow up in February 2009. It's difficult to predict at this point, but I’m putting my bets on a tough market ahead.

Dan's Note: Short answer, if you can avoid raising a VC round in 2009, do so. Good deals will get funded, but given the increased macroeconomic and financing risks, valuations will take a hit -- particularly during the next 6 months of uncertainty. The added creative innovation to bootstrap your runway to 2010 will also pay long-term dividends for your business.

Adobe Air Trademark Auction?

noreply@blogger.com (VC Dan) — Wed, 03 Dec 2008 20:35:00 +0000

Upon opening my office snailmail today I was surprised to find a brochure publicizing a "Webcast Auction" liquidating AdobeAir® products. I didn't remember MasterCool or ArchCircle apps based upon AdobeAIR. As I looked inside I was even more intrigued by the opportunity to bid on intellectual property including the AdobeAir® trademark.

Of course, this auction had nothing to do with Adobe's AIR web development platform (it involved manufactured cooling products), but the brand is ironic given how aggressive Adobe's been on trademarks -- they even went after the founder of freshAIRapps.com because it was a directory of AIR applications using "air" in the domain.

Related images: adobe air, adobe air, adobe trademark, air apps

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