altgate

What Just Happened?

Did we just lose $1.2 trillion in order to save $700 billion?

VentureWire: Ohio Police Charge VC In Hit-Run

There's a joke in here somewhere:

Venture investor Timothy Biro, one of two managing partners at early-stage firm Ohio Innovation Fund, was formally charged on Thursday with vehicular manslaughter and leaving the scene of an accident following a Tuesday night crash in Cleveland that left a 31-year-old bicyclist dead. Biro was scheduled to enter a plea to the charges Friday, Cleveland Police Department spokesperson Thomas Stacho said. While leaving the scene is a misdemeanor, the other charge can be tried as a felony, he said. Biro was given a breathalyzer test shortly after a witness followed him from the scene and called police, Stacho said, and investigators believe he was not under the influence at the time. "He's been very cooperative with our detectives," Stacho said. "He gave a written statement to our Accident Investigation Unit." A judge likely will set bail for Biro, Stacho said Thursday. According to police reports, Biro hit bicyclist Terrell Jones on 55th Street in Cleveland just after 9 p.m. on Tuesday, then fled the scene. Another motorist followed Biro, police said, and phoned in his license plate number to police. Biro was arrested about 20 minutes after the crash, police said. Jones died in a local hospital the following day. Further details were not immediately available. Representatives from the firm couldn't be reached for comment. Based in Cleveland, the Ohio Innovation Fund is an early-stage investment firm with a number of biotech and life-sciences investments. The firm's Web site was disabled Thursday. The firm manages Ohio Innovation Fund I LP, which was raised in 1997 with $11.2 million. It typically invests $250,000 to $500,000 in first rounds and up to $1.25 million based on milestones. According to VentureSource, the firm has at least eight portfolio companies, four of which are still private. Biro serves on the boards of at least four start-ups: FLX Micro Inc., a spin-out of Case Western Reserve University that manufactures micro-electrical mechanical systems; Imalux, a provider of commercial medical imaging equipment based on optical coherence tomography; Inspherion, a provider of business intelligence software; and SpineMatrix, which sells spinal imaging products that evaluate low back physiology.

But then someone died so I'm not going to make it...

A Bridge Loan Or A Pier Loan?

It's called a "bridge loan" not a "pier loan" because it gets you somewhere you'd like to be. 

The Wall Street Journal had an interesting article describing a round-table meeting of some great minds on the current financial crisis.  Apparently during the meeting they polled the panelists.  Anyway, this quote jumped out at me:

Yale’s Macey seemed to be a “no” (the votes were cast electronically) as he drew a distinction between successful bank bailouts, like that of Sweden in the 1990s, and unsuccessful ones, like Japan, also in the 1990s. A successful bailout clearly identifies who is getting bailed out and exactly how the bailout would save the system, he said. In Macey’s estimation, Paulson’s plan to buy up masses of mortgage securities is too vague to succeed. It isn’t clear who is benefiting, bank depositors, or bank management, or mortgage holders, he said, and the plan fails to directly ensure liquidity and solvency for financial institutions.

I agree with Macey; this $700BB proposal just seems too random and vague.  Where are the Ross Perot style charts that show how this will work?  Reminds me of that book, The Shock Doctrine, by Naomi Klein.

If Wall Street were a company and the US Government was their venture capitalist then this would be a scenario where the VC would dribble out money in a month-to-month bridge loan until such time as the company could show a clear path to stability/growth.  There is no way a company could (or should) raise a large round of financing (at any valuation) in a large crisis.  Congress should take a similar approach and fund Wall Street month-to-month and not in one giant $700BB tranche.

TechStars

I was curious about TechStar after learning of it today.  I saw this post and Brad Feld describes it more fully in the video below.  It's basically a pre-seed mentoring program for startups.  It's more like Ycombinator than DEMO/TechCrunch 50 as I said below.

How To Make A VC Jealous

Tom Keller, the CEO of IntenseDebate, was to present at TechStars which apparently is some event where startups give their pitches to an audience of VCs a la DEMO or TechCrunch 50.  So Tom gets up and says something like, "I don't have any slides and I'm not looking for any money...but I do have a surprise."  And then he introduces the CEO of Automattic (the company that owns Wordpress) who goes on to say that he just bought IntenseDebate.  Face!

That had to feel pretty good.  Congrats Tom!

You can watch a clip of the move below.

Advice From Entrepreneur-Turned-Investor

Naval Ravikant helps run Venture Hacks and has previously started several companies including Epinions.com.  He has also done a bunch of angel investing.  In this interview he talks about what he looks for as an investor:

1. Great team
2. Huge market
3. Proprietary technology
4. Proprietary distribution channel
5. Direct monetization model

I like the quote "Social networks are still an experiment." How true.  You can watch the video below or check out this "venture hack."

Canary In The Mine?

I just read this article on the WSJ Blog about how 9 of our 10 hedge funds are not performing well enough to collect performance fees and that just 3% of hedge fund-of-funds are above their high water mark.

That's crazy.

There are about 10,000 hedge funds but in the first half of this year about 350 shut down compared to about 500 in all of last year.  This has to mean a lot of hedge funds are going to close down since no one is getting paid.

While there are many fewer venture capital funds in the US (about 800 in the last data I saw), if the performance distribution is similar for them, that means less than 100 VC funds are collecting performance fees.  It'll take longer to feel the pain, but I wouldn't be surprised to see a lot of VC funds close up shop over he next year or two.

More On How To Pitch To VCs

Here are some more pearls of wisdom from David Rose himself (this is also a test of Disqus' reblog feature):

Furqan, you might not have known me, but I've been following YOUR writings for some time now [grin]. Which, by the way, I've found to be almost always right on target! Thanks for the nice summary of the video. While Guy and I developed our suggested sequences independently (we've known each other for over 20 years), you'll note that they both share the most important feature in common: logical progression. That really is the single most important thing in crafting a presentation, and the one most often violated in the raw pitches I see.

In both cases, we're telling you to start out with some baseline education: what is the market you're in, and what is their pain? Then show us how you solve it, and how you make money doing so on a micro level (that's the business model). Next is the all-important question of who is going to buy it and pay you money, and how you're going to reach them, followed by who else is trying for the same market, and why you're going to win.

At that point, you're ready to roll up the numbers to the macro level, and give us your financial projections, based on the important drivers (customers, installations, products, whatever) that you've previously identified. Finally, you let us know what you need to make this work, and why you want to work with us in particular.

The one real difference in the two sequences is where you introduce your team. Since investors like us 'bet the jockey, not the horse', that's often the most significant slide in the presentation. I've found that it can go either at the beginning (where I have it in the list) or toward the end (where Guy has it). What tips the decision is the answer to the question: "how crucial is THIS particular team to THIS particular business plan?"

If the answer is 'absolutely critical' (because you are/have the industry leading expert, or someone with important connections or domain expertise), then it should go up front, because it will color (positively) the way the entire rest of the presentation is viewed. But if there's nothing THAT special (ie, you're "just" a bright entrepreneur with a good idea, or a solid MBA with general business experience) then it should go at the end, where it simply reassures the investor that you have the competence and skills to be able to executive the plan appropriately.

If I had to boil the whole thing down to five bullets, they would probably be:

1) Logical progression!
2) Photos, not text
3) Validators are critical
4) Use a remote control
5) Never look at the screen

Thanks again for the review!

Originally posted as a comment by davidsrose on Altgate using Disqus.

Interview With A VC

This is a long interview of a VC (Bob Ackerman) by Robert Scoble.  It starts slow, but the last half is actually pretty interesting.  My favorite bit is when Bob talks about his anti-portfolio and how he turned down investing in Akamai because they wouldn't explain their Algorithm (he does finger quotes every time he says algorithm).  It's worth watching to better know your customer if you're thinking of raising VC.

Startup Tips For Entrepreneurs

A video interview from TalkTech:

"This video focuses exclusively on early-stage startup advice for aspiring entrepreneurs. Thomas Stocking and David Dennis at GroundWork Open Source walk through the process of starting a company, step-by-step, covering everything from selecting a winning product idea to negotiating VC funding."

I wholehearted agree with the advice to find people you respect (but may not necessarily like) to help you vet your idea/business.  I wrote more about this in an earlier post.

How To Pitch To VCs

David Rose (who I confess I did not know of before watching this video) gives a presentation on how to pitch to VCs.  Rose is the founder of New York Angels and also CEO of Angelsoft, the software platform used by most angel investment groups (and about which I previously blogged). 

Rose starts by listing the 10 characteristics of an entrepreneur that the investor is attempting to assess in the pitch:

1. Integrity
2. Passion
3. Experience
4. Knowledge
5. Skill
6. Leadership
7. Commitment
8. Vision
9. Realism
10. Coachable

He gives some tips on how you might help the VC favorably assess these qualities.  Then he talks about a few things you should be sure to do during your presentation:

• Make sure your presentation has a logical presentation
• Talk about things the investor knows / understands
• Validate what you say with evidence
• Establish believable upside in your business

Followed by some things you should NOT do:

• Talk about things the investor does not know about or understand
• Say things the investor "knows" not to be true
• Have internal inconsistencies in your pitch
• Include typos, errors or other mistakes

In terms of what the presentation should look like he says your slides should ideally be:

• Short titles with short bullet points
• Even better, just headlines
• Or best of all, just images

He then promptly breaks that rule by putting up a slide of the slides you should have in *your* presentation (basically a modified Kawasaki-10, which I'd argue is a better framework):

1. Logo (first page)
2. Business overview
3. Management team
4. Market
5. Product
6. Business model
7. Strategic relationships
8. Barriers to entry
9. Financial overview
10. Use of proceeds
11. Capital and valuation

And then to close he has a few tips on how to run the actual presentation:

• Use "presenter mode" in PowerPoint or Keynote
• Use a remote control
• Your handouts should not be your presentation
• Don't read a script
• Never look at the screen

Well, if that summary wasn't enough for you, you can watch the video with Rose's tips on pitching VCs (it's about 15 minutes long) here:

Calling All Boston Area Entrepreneurs

I just got this email from a friend who is a Trustee of the Mass Technology Leadership Council. It sounds like a great opportunity for entrepreneurs. Recently I posted on getting experts to help you "8-Mile" your presentation...this could be a good way to do that. Read more below:

"As a Trustee of the Mass Technology Leadership Council, I've been very involved in designing a new conference focused on helping early stage entrepreneurs. Now we need your help in finding those entrepreneurs, and encouraging them to apply for sponsored slots at the event. Who are the up-and-comers? Send them to apply at the link below.

Four generations of entrepreneurs will gather in a new setting on October 2, 2008. Those who apply can get discounted admission, and two small-table meetings with experts they choose. We have over 45 experts and room for 60 sponsored entrepreneurs. The conference is 200 people total.

Instead of the planned sessions and passive audiences of typical conferences, MassTLC’s Innovation 2008 is an unConference where the agenda is set by the attendees, where 8-12 discussions run in parallel in each of four sessions and where everyone gets to know each other by gathering around areas of common interest. A professional facilitator helps make it happen. For more information visit the MassTLC Innovation 2008 website.

General Admission is open to all. Anyone involved in technology innovation should consider attending."

Microsoft Cancels Seinfeld/Gates TV Ads

Wow.  Those ads were bad so I'm actually not surprised to see them go.  However, I am impressed that Microsoft was so quick to cancel them...usually a large company like Microsoft will soldier on despite all the evidence they shouldn't.  Even so, a pretty expensive goof (reportedly Seinfeld got $10MM for what appears to be just 2 commercials).

The Entrepreneur I Wish I Were

If you haven't seen any of the TED presentations, definitely check them out. TED has had some amazing presentations, but this one below is a showcase of the true entrepreneurial spirit. Enjoy!

Hacked A Prediction Market Lately?

It seems like there are a lot of options out there for prediction market platform software. I'm interested in embedding a prediction market within an existing community site ideally using our UI with an existing back end.  Contact me if you're a hacker and I can share more detail.