VC

Get the Anti-Startup and Anti-Angel Provisions Struck From Senator Dodd's Banking Bill

Doddretire_doomsday

This is part of my Series on Angel Investing.

There is a rather large missile rapidly approaching America's innovation culture. Predictably, it has been hurled in the most careless of manner by a group of uninformed politicians and their staffers in the form of Senator Dodd's sweeping Banking Bill. Putting aside the merits and thrust of the Bill itself, (which ostensibly seeks to regulate the banking industry), there are two provisions in it which, if not removed ASAP, will essentially wipe out a large chunk of one of America's engines of innovation- namely angel investing. These provisions will raise the bar on the definition of an 'accredited investor' from $1M in net worth or $250K in annual income to $2.3M in net worth or annual income of $450K! It will also hamstring angel investing by slapping any such investment with a 120 day SEC review.

If this concerns you, you may want to call your congressmen and educate them on this issue. 

For more in depth condemnation of these stupendously destructive provisions, I refer you to the following cacaphony of frustrated voices emanating from the startup and investment community:

Venture Beat: Angels Sing: Frankly Ridiculous Restrictions Might Destroy Silicon Valley

NY Times: Angels Rebel Against Dodd Bill

Kopelman: Dodd Isn't on the Side of Angels... or Startups.... It Proposes a 120 Day SEC Review Period

Litan: Proposed 'Protections' for Angel Investors are Unecessary and Will Hurt America's Job Creators

Xconomy: Dodd Bill Could Render Startups Too Small to Succeed

TechDirt: Why Does Financial Reform Punish Startups and Angel Investors?

Wilson: Startups Get Hit by Shrapnel in the Banking Bill

Shane: How Dodd's Reform Plan Hurts Startup Finance

For the next post in this Series, click here.

The Future of Venture Capital is Hanging-Out Downtown: The Not So Big Secret

Wasp_drinking Drunk-hipsters

“What has been will be again, what has been done will be done again; there is nothing new under the sun.”

Ecclesiastes 1:9

This is part of my Series on Venture Capital.


Despite the hyped meme people are putting out there about the “venture model being broken”, I’m definitely of the school that believes Venture Capital is merely going back to its roots. Smaller, smarter, more agile, leaner, that’s all. Just look at the charts Kopelman’s been sharing of late. If you ask me, this is all a very good thing.

Speaking of Kopelman, here’s a guy who, along with a few other smaller/high-volume funds is executing very effectively on this leaner VC model (on the east coast at least).  I really do think his extremely effective special-forces model is part of the new wave we will be seeing a lot more of.

To give you a concrete example, this ostensibly “Philly-based” swat team recently executed the equivalent of a pub crawl through all the NYC incubators in a single day, all under the covering fire of a steady stream of tweets, four-square yawps and various other forms of digital pitter-patter that announced their comings and goings. No doubt their approach is catching the attention of their brethren VC’s ensconced in more conventional settings and habits. 

And let’s face it, who really needs an office in this climate? This new breed of bad-ass-VC will meet you in cafes, at the Ace Hotel, in noisy diners- they don’t care. Bring it on. Headquarters, what’s that? That’s silly to them. You go where the entrepreneurs are and you hang with them.

It’s actually been incredibly enjoyable to watch- and with the advent of widespread VC blogging, the Funded, the ubiquity of cloud computing, open source software, younger and younger entrepreneurs and hence much less funding needed to launch a web business- we are witnessing the opening-up of, accessibility of and democratization of the entire industry. And by the way, First Round is just one of an entirely new breed popping up all over the place which includes the Founder Collective, True Ventures, Andreessen/Horowitz and others.

Here’s my tongue-and-cheek take on what’s been happening and what’s going to happen (on the east coast at least).

What’s been happening:

  • Last summer, LP-types reading plays like “Waiting for Godot” on Herreshoff sailboats off the coast of Maine started calling the office sounding concerned and asking what’s going on.
  • This started a small panic and suddenly, guys comfortably ensconced on “VC Hill” in Waltham started driving to Cambridge a lot to get back in the action.
  • Extremely formal guys in French cuffs known for unwinding with $100 bottles of Sancerre after work suddenly started blogging enthusiastically about the arm-wrestling and bowling events for entrepreneurs they are hosting in various “cool-sounding” locations.
  • In NYC, uptown VC’s started trying on jeans they haven’t worn in years only to realize they don’t fit too well.


What’s going to happen:


  • In five years, there will be half as many funds operating as there are today.
  • The last ones standing will be the very established funds on one extreme and this new breed of small, agile, entrepreneur-run operation on the other.
  • Smaller, leaner, genuinely entrepreneur-friendly funds will thrive in this brave new world.
  • Most of them will be “hanging-out downtown”.


PS: (Oh, and by the way, I’m talking about tech VC, not biotech VC. Commissioning the optimization of molecules and the like from reserved and stately offices supported by enormous amounts of capital is not going anywhere for a while IMHO.)

All Hands on Deck!! NYC Startup Job Fair Finally in Sight for University Entrepreneurs

This is part of my Series on University Entrepreneurship.

I've written here about the magnificent tidal wave of university entrepreneurship I see cresting in this country. But those of us in NYC will have the distinct pleasure of watching it converge with red hot Silicon Alley's own wave in the form of the much awaited and upcoming NYC Startup Job Fair. It is to be held at AOL's NY headquarters on April 9 from 1-4pm. Big time congrats to the organizers for pulling this off!

So if you are a student or recent graduate of a NYC university trying to break into the world of start-ups, or if you are a start-up looking for some talented and enthusiastic university students, you should definitely register for this event ASAP as space is limited.

Sign-up here:

NYC Startup Job Fair
Where: AOL HQ (770 Broadway)
When: Friday, April 9th 2010
What Time: 1:00PM – 4:00PM

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Weekend Reading

Sherlock Holmes Strikes Again: Robert Downey Jr. Wins Golden Globe for Portrayal of the Great Sleuth

Robert-dowey-jr-wins-golden-globe-best-actor-08

Last week I wrote this post about why I believe Sherlock Holmes would have made a terrific Venture Capitalist. I also mentioned that the talented Robert Downey, Jr. had put forward a really terrific and original interpretation of the great sleuth in Guy Ritchie's latest film. I was therefore delighted to see him receive widespread recognition for this performance in last night's Golden Globe Award ceremonies. His acceptance speech was hilarious and he even gave Arthur Conan Doyle his due, calling him a genius and quoting him. Have a listen:

Notable News: "Read All About It"

Notable News in the New Year: "Read All About It"

Some Thoughts and Best Wishes for the New Year: Here Comes 2010!

Usain_bolt_234252s

As 2010 approaches, a few wishes and thoughts come to mind:

1)     First, I want to thank you, the readers of this blog for all your encouragement, thoughtful comments and words of wisdom throughout the year. I wish you all much success and happiness in 2010 and look forward to our continuing dialogue.

2)    I also want to wish the entrepreneurs and investors I work with on a daily basis all the best for the coming year. It is truly a privilege to work with so many enthusiastic and dynamic individuals in a city with such a close-knit start-up community and so many great companies. The New York tech scene is on a huge roll. Let’s continue to make it happen!

3)    2009 was certainly a tough year and the difficult economic climate may well persist.  The keys for fledgling start-up companies will no doubt be to stay focused, flexible and ultra-determined. Stick to the basics of “getting from zero-to-one” at all costs so as to survive and thrive.  Surround yourself with high-quality missionaries who are all about “making it happen” and run like Usain Bolt from everyone else. In this environment there is literally no time for mercenaries, negativity, complainers and/or bureaucrats any more. The stakes are simply too high.

4)    Lastly, as good old Mark Suster says, JFDI and take the plunge!

Monkmakestheleap

Notable News: "Read All About It"

Newspaper_boy

Mark Suster: Both Sides of the Table:  "Hiring at a Startup? Know Thy Weaknesses"

Fred Wilson: Musings of a VC in New York: "The Herd Instinct"

Martin Zwilling: Startup Pro: "Bootstrap Your Business to Retain Control"

Charlie O'Donnell: This is Going to be Big: "To Poach or Not to Poach"

Bethany McLean: Vanity Fair: "The Bank Job"

Paul Kedrosky: Infectious Greed: "The Case for Start-Up Visas"

Vivek Wadhwa: Business Week: "Let's Give Visas to Startup Founders"

Notable News "Read All About It"

Notable News: "Read All About It"

Notable News: "Read All About It"

University Spinoffs: A Stunning Track-Record of Success

Hat-throw graduation  

This is part of my Series on University Entrepreneurship.

 Recently I met an entrepreneur at a function who, upon learning that I ran the Venture Lab at Columbia University asked me why he should pay any attention to the university space at all- telling me that he had never heard of any successful university spinoff companies. I responded by saying that I wasn’t surprised and that this view is actually a common misconception. I went on to point out that companies with household names such as Google, Lycos, Genentech, Gatorade, Hewlett Packard, Polaroid and others were all formed around university intellectual property. He was definitely shocked to hear this and we subsequently had a pleasant discussion about the Bayh-Dole Act, the spinoff process, and essentially the whole fascinating landscape of university entrepreneurship. 

I have conversations like this so often that I thought I’d share a few statistics about university spinoffs to which I can refer entrepreneurs and investors in the future. 

  • Over 400 university startups are created each year based on federally funded R&D.
  • Google, Netscape, Genentech, Hewlett Packard, Polaroid, Lycos, Sun Microsystems, Silicon Graphics, Chiron, Amgen, Regeneron and Cisco Systems are all examples of university startups.
  • 68% of university startups created between 1980 to 2000 remained in business in 2001, while non-university based startups experienced a 90% failure rate during that same time period
  • 1/3 of SBIRs reported involvement with a university including scenarios where either the founder was a former academic, university faculty were consultants, universities were subcontractors, or graduate students were employed
  • 8 percent of all university startups go public, in comparison to a "going public rate" of only 0.07 percent for other U.S. enterprises - a 114x difference
  • By way of example, as of FY 2009, Columbia University has spun-off over 100 companies historically, over twenty of which have either been acquired or gone public, over 30 of which have been venture-backed at some point in their life-cycle, leading to the creation of in excess of 1500 new jobs.

(Sources: NCET2 and Columbia Technology Ventures)

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For Part Twelve in this Series, click here


Old School Angel Investing

Conrad in hat Conrad

“It is not the clear-sighted who rule the world. Great achievements are accomplished in a blessed, warm fog.” -Conrad

For many years I was a subscriber to Conradiana, a tri-annual journal of all things related to the life and works of the venerable Joseph Conrad. It’s a terrific scholarly publication and I’ve recently made a note to myself to sign-up so as to start receiving it again. During this time I sometimes toyed with the idea of buckling down and submitting an article with my supposedly original insights into the much analyzed short work, the Secret Sharer. Having no university affiliation or professorship to bolster my credentials, however, I would have had to submit as a so-called “independent scholar”- a bit of a stretch to say the least. Recently though, upon reading two separate Conrad biographies by John Stape and Jeffrey Meyers respectively, I realized that perhaps I could presume to submit a work to Conradiana after all, and one on a topic where few professors could boast of similar expertise. The submission I have in mind would bear this simple title: Joseph Conrad as Angel Investor and Entrepreneur.  As off-topic as this might come across, keep in mind that Conradiana editors have in the past published a title such as:  Colonial Encounters and Cultural Contests: Confrontation of Orientalist and Occidentalist Discourses in “Karain: A Memory”.  Or how about this beauty: The Power of Suggestion: Conrad, Professor Grasset, and French Medical Occultism.  In fact, maybe I’ll do myself one better and petition the Kauffman Foundation to provide me with a generous grant to do a field study on the subject for twelve months so as to extrapolate what modern investors can learn from Conrad’s track record of international investment in a pre-IPO world?  I’m sure they’ve funded worse boondoggles than this, no? (Well, maybe not).

Well, even if Conradiana and Kauffman should roundly reject my overtures, one thing is clear: Joseph Conrad was certainly a 19th century version of the modern angel investor and sometime entrepreneur.  And true to his romantic nature, he was willing to get involved with the most daring ventures with his meager earnings- always with an eye for out-sized returns so as to liberate him from the indignities of life at sea and subsequently, those of having to eke out a living at his writing table.  

According to Myers, Conrad’s various ventures included, “…. a whaling venture, piloting in the Suez Canal, Australian pearl fisheries, the Japanese navy, Canadian railroads, business in Newfoundland….”

From Stapes I learned that he actually started quite early in life and was involved in some illicit gun-running operations during his time as a young seaman in Marseille. Later, between stints on the Loch Etive and the Palestine in 1881, he and a former Captain of his hatched some sort of business together. Upon moving to London he bought an equity stake in the German shipping agent firm, Barr, Moering, and did some work for them out of their London offices from time to time. Then there was the South African gold mine debacle in 1895, an investment which allegedly failed only due to a shipwreck off the coast of Brittany which took the life of the entrepreneur Conrad had backed.  Some six months before this and soon after the release of his first published work, Almayer’s Folly, another venture he funded failed, though exactly what type of investment it was remains a mystery, only obliquely referred to by him in a letter to Poradowska, a Polish cousin of his.

I believe that there is much in Conrad’s work and remarkable life story from which we entrepreneurs and investors can draw inspiration. He was from Poland and his original name was Jozef Teodor Konrad Korzeniowsky. He became perhaps the greatest artist ever to write a novel- and this in his third language. His writing too, was completely unique, positively foreign in its rhythms and structure. And this too struck me- that one of the greatest “English” writers did not start writing until he was approximately 40, heard English spoken for the first time on ships when he was 21 and spoke the language with a thick, sometimes indecipherable accent throughout his life. His is the story of determination if nothing else.

Who knows when I’ll get to writing this paper for Conradiana. And though Conrad’s investments and entrepreneurial exploits were rife with disappointment, it’s nevertheless been inspiring to catch a very real glimpse of his enterprising and romantic nature through the prism of his daring ventures and investments. Of course this essence is very palpable in his writing- but it’s there too in the story of his life - that same mind-set so many of us in the world of entrepreneurship, start-ups and angel investing share.  His was a world of swirling winds and wooden ships, of long works written by candlelight, of isolation, imagination- and the mystery and promise of distant lands. Ours is a world of cloud-computing and silicon, of instant messaging, of twitter and the hunt for elusive sources of efficient clean energy.  Great uncertainty and challenge characterize both worlds, as always. And though the surroundings may change, the striving and determination in us to innovate and overcome persists.

As Conrad himself wrote,

“It is not the clear-sighted who rule the world. Great achievements are accomplished in a blessed, warm fog.”

“Facing it — always facing it — that's the way to get through.”

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Angel Investing (3): Judging the Team

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Rodin_Thinker                Ranpic193 gorilla face close up monkey thinking hand eyes

This is part of my Series on Angel Investing.

Another observation I’ll make is this. With the advent of the internet we’ve obviously seen a remarkable democratization of information and in particular, unprecedented access to heretofore difficult-to-obtain information. Previously arcane disciplines such as venture capital, for example, have been “opened-up” and laid bare for anyone with a laptop and some free time to explore.  Chess is another example. In the past decade the internet and sophisticated chess software programs have created the phenomenon of the 12 year old Grandmaster! No longer are years of practice and study with dusty old chess tomes and wizened instructors required for a really talented human being to acquire the knowledge needed to ascend to this kind of playing strength. Now 10 year olds can course through thousands of classical grandmaster games with the click of their mouse and, through pattern-recognition and raw talent traverse in a few years’ time a landscape that required almost a decade of study only a generation ago. Do we even need to discuss the technological revolution we’ve seen in golf? Videos, DVD’s, handheld GPS devices to tell you the yardage, hybrids, belly putters, and titanium shafts lined with kryptonite. Everyone has access to equipment that Sam Snead could have only dreamed of.  We now see things that are shocking to the senses as a result. I already mentioned the spectacle of the baby Grandmaster in chess. What about that celebrity golf event I stumbled upon on TV a few years ago? Remember that kid actor from the movie Sixth Sense who could “see dead people”? I watched this tiny fellow stride up onto the tee like King Kong, suddenly pull out his driver like it was Excalibur and start smashing huge drives way out there on every hole. I think he was hitting it past Marky Mark. He'd probably hit puberty by then but still looked like he was maybe 15 years old to me. No doubt he’d shelled out a lot of his movie royalties for professional golf instruction out in L.A.

For the most part though, most of us who are not quite in the league of the Andreesens, Kasparovs and Tiger Woods’ of the world are simply walking around with an immense amount of superficial information in our heads. (Certainly an order of magnitude more than our parent’s generation). Thousands of Google and Wikipedia searches, films, DVD’s and the like are no doubt responsible for this.

And in this particular context- which involves the judging of entrepreneurs, you’ve simply got to be aware that plenty of people looking for funding have read pretty much everything that’s available on the net having to do with raising capital. So what I’m saying is that a ton of entrepreneurs you’ll meet all “know what to say”.  You’ve just got to get good at seeing when they don’t “know of what they speak”.

The bottom line is: just look for authenticity. You’ll know it when you see it.

For the next post in this Series, click here.

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