From VC cafe, What makes a good business model a compelling business opportunity? suggests you put yourself in the shoes of the venture capitalist, and ask yourself a few key questions about your plan.
Monthly Archive for January, 2009
Straight from Calagator.org, here are this week’s events:
Monday, Jan 26, 2009
8:00 am, Building a Green Business
6:00 pm, Transitioning to iPhone Development – Night & Day Studios
6:00 pm, Planning Mtg for Social Media Club Portland
7:00 pm, PDX Critique monthly meeting
Tuesday, Jan 27, 2009
9:00 am, Portland Business Alliance Business Leads Exchange
12:00 pm, OTBC Legal Series: Patents
1:00 pm, SCORE: 7 Steps Businesses Must Consider in a Bad Economy
5:30 pm, Tech Strategy 2009: More for Less
5:30 pm, AMA: From Face-To-Face to Interface
6:00 pm, Portland Data Plumbing User Group (pdpug)
6:00 pm, Arduino Programming Work & Learn
6:00 pm, Website Fundamentals Overview
6:00 pm, IEEE PACE: Why Now may be the Time to Develop Overseas Markets
6:30 pm, Columbia River Gorge Tech Alliance meeting
7:00 pm, [Science Pub] Snowflakes, Stress, and Semiconductors: Do You See A Pattern Here?
Wednesday, Jan 28, 2009
12:00 am, 3-Day Advanced Ultimate SEO Mastery Workshop
7:30 am, AeA BOD Education Series: The Board’s Role in Financial Management in Uncertain Times
7:30 am, OBA: Insights for Succeeding in Bioscience
8:00 am, SCORE: 5 Essentials of Effective Selling
9:00 am, SAO: The HR Audit – Webinar
1:00 pm, OEN: CEO Roundtable-Building the Environment for Success
4:00 pm, Online Community Manager: Yes, It’s Really A Job
5:00 pm, Corvallis Beer and Blog @ Cloud9
6:30 pm, Personal Telco Project Monthly Meeting
7:00 pm, Portland JavaScript Admirers’ first monthly meeting
7:00 pm, Alexis Zeigler, author of Culture Change, Real Solutions for Peak Oil and Global Warming
Thursday, Jan 29, 2009
10:00 am, OEN: Angel Investing 101
12:00 pm, OTBC Information Session
5:00 pm, DEVSIG Meetup
5:30 pm, Shizzow Developers Meetup
5:30 pm, Portland Business Alliance Green Hour
Saturday, Jan 31, 2009
10:00 am, iPhone Developer Quick Start Class
1:00 pm, Town Hall on the Economic Crisis
This weekend, I did a presentation for one of Jack Raiton’s classes at OHSU (formerly OGI) on “Success Factors” for venture-funded tech startups. It’s a fun presentation that I’ve done before where I look at some of the success-factor lists that have been published by academics, entrepreneurs and venture capitalists. And then, of course, I add my own bias based on my experience having been in a few startups and having worked with a large number of startups (100+ ?) while at OTBC.
So to put it on the record, I’m posting my success factor list. It ends up being 21 factors. I know – that’s way too long for a blog post. (Ten seems to be a more popular maximum-length blog-post list.) But I can’t help it. It came out to 21. (And the more startups I work with, the longer the list gets.)
The factors are roughly (very roughly) ordered according to priority. Most apply to any startup, but some are specific to venture-funded startups
So here goes. My view of the critical success factors for startups:
- You must have incredible commitment, drive, and focus, and be willing to ignore the critics. Launching and growing a company is hard. There will be many challenges and tough calls. And when doing something creative/new, most people will tell you you’re crazy.
- You have to be willing to change the strategy when it’s wrong – and remember: you never get it right the first time. (Yes, this is 100% in conflict with factor #1. It’s one of the most frustrating judgement calls a startup CEO has to make – deciding when to keep driving ahead and keep focused on the goal, and when to change direction because the goal was not the right one.)
- You must have a compelling customer proposition – a “must have”. Why else will people pay good money to an unproven startup (that they know, statistically speaking, will probably be out of business next year) with an unproven product? (And don’t depend on you’re own judgement for this. You’re probably not a representative sample of your target customer population. Go test it. Do some primary market research.)
- You have to clearly understand what disruptive change is creating an opportunity for your startup. If something disruptive has not changed either the market or the technology, then most likely this is a need that established players are already addressing. So what disruptive change has created an opportunity for your startup to eek out a niche in an emerging market that will get very, very big?
- Timing. It’s not fair, but timing (good and bad) and luck (good and bad) are very high on the list of critical success factors. Unfortunately, you can’t gage either timing or luck until it’s too late. But you can do all you can do to position yourself to take advantage of the good timing and the good luck that eventually will happen!
- You must have a believable advantage. Assume that 10 other people on the planet have the same idea. Why will you win?
- Create barriers to entry. There’s a real art to creating land mines to divert potential competition. It’s an art worth learning.
- Startup experience is very, very important. If you don’t have at least one team member that’s been at a startup from day 1 – go find one. There are basic mistakes you want to avoid as a first-timer.
- Know your market. If you don’t have someone who has used or built or marketed or sold (pick at least one) products in your market before (i.e., your team has no domain knowledge and no relevant rolodex of customer contacts) – absolutely go find someone who has that experience. Not understanding your market is lethal.
- You need a solid sales and marketing plan. Most tech teams don’t have a clue about marketing. Find someone who has experience marketing/selling the kind of product you’ll be selling. (Not generic marketing experience; experience marketing/selling a product like yours.)
- Make sure the business can scale profitably
- Understand who will buy and why, how will you sell, how long is the sale cycle
- Understand the competition
- Conserve cash –bootstrap as long as you possibly can
. If you can build the business without investment dollars, do it! (Investors bring many challenges. But sometimes – you have to have the money…) - Plan on self-funding for at least the first several months. Investors don’t fund ideas. You have to make headway first.
- If you plan to get investment – get more than you think you need. You’ll need it.
- Don’t lose sleep over “losing control”. If you take investor money, you’ve already lost control, no matter what percentage of the company you’ve sold, for at least 2 reasons: (1) The investors likely have some very important special rights, which really put them in control. (2) When you accept investor money, you are, by definition, living beyond your means. The investor money is likely to run out (almost always does) before you are cash flow positive, so you are dependent on them for more money. (Let me restate that: you are dependent on them for your company to survive.) Believe me, that is control. You are addicted to something you must have…
- Founders must be prepared to replace themselves. It’s very unusual for the launch team to be the right lineup 1 year later. And yes, that includes the CEO.
- Anticipate potential problems and threats – only the paranoid survive
- Once you get venture funding, hit your milestones. If you don’t, life gets ugly. (See factor #
- If you survive long enough, good timing (and good luck) will happen. This is a corollary to factor #5. Bad luck happens. Making mistakes happen. But if you learn from your mistakes, and you can survive long enough (read as: don’t run out of cash) then you will go up the learning curve and the odds of success increase.
The Business Journal reported that Fab 20 on the Intel Ronler Acres campus will start slowing down by September and be closed by the end of the year. Not good news for the 5,000 to 6,000 workers who will be affected.
I somehow missed this on the calendar this week, and wanted to get the word out on the event Survive and Thrive in 2009, coming up on January 23. One of the presenters at this seminar is OTBC’s Mark Paul. It’s worth checking out. Get more info here
As Mike Rogoway reported, Oregon VC funding held up OK in ’08, at least compared to the rest of the U.S.
Oregon startups brought in $186.6 million last year, according to VentureSource, down 11 percent from 2007′s $209.8 million.
As overall venture activity slowed during the dismal fourth quarter, Oregon’s haul actually jumped — from $13.3 million in Q4 ’07 to $28.15 million in the last three months of ’08.
To be fair, Q4 of 2007 was a bad quarter for VC investments in Oregon, so improving over that in 2008 is certainly a good thing, but I wouldn’t throw a big party.
I wondered what companies collected the $186.6 million last year, and started a list of 2008 VC investments I’ve read about:
- Castor & Pollux Pet Works, $21.7 million
- NexPlanar Corp., $14.5 million
- Neopad, $14.1 million
- Wi-Chi, $8 million
- Splashcast, $4 million
- iMove Inc., $4.25 million
- Pulse Health $2.15M
All these add up to just $68.65 Some other possibilities:
- Typhone closed “millions” (they didn’t say how many)
- SpectraWatt (did it close?) $50M
That might get us to $118.65. Do you know about other VC investments in Oregon companies that closed in 2008? Let me know if you have corrections or additions to the list.
Fred Wilson blogged this week about a recent rule from FASB (the organization that governs accounting standards) which basically requires that investments be valued at “fair market value”. That will cause VCs to do even more valuation homework at the end of each year, and will no doubt lead to interesting discussions between VCs and their limited partner when one VC reduces the valuation of a portfolio company, and another VC increases the value of the same company. Startup valuation is indeed a tricky game, and Fred’s post provides some interesting perspective.
Everyone knew it was likely to be grim, and now, according to a Dow Jones VentureSource press release, it’s official: Q4 was a terrible quarter for VC investments – especially in IT:
- Total Q4 VC investments in the US were $5.5 Billion; down 30% from Q4 of 2008
- IT investments were just $2.2 billion, down 36% from 2007, and the weakest quarter since 1998
- Healthcare investments in Q4 were down 42%
There was some positive news for 2008:
- Energy and utilities in all of 2008 attracted $1.3 billion, up 58% over 2007
- Consumer services attracted $1.3 billion in 2008, up 58% over 2007.
Quoting from the release:
“The data confirms what we’ve being hearing anecdotally for some time that many venture capital firms are circling the wagons to weather the downturn and are focusing more on the health and vitality of current portfolio companies rather than new investments,” said Jessica Canning, director of Global Research for Dow Jones VentureSource. “And while traditional areas of investment like IT and health care, which are well stocked with venture-backed companies, are seeing predictable pull-backs, VCs are still eager to put capital to work in burgeoning areas like energy and consumer goods, which saw record investment in 2008.”
And a not-very-inspiring positive spin:
Ms. Canning added: “Frankly, if you have a promising business model and can land funding, it’s a good time to start a company right now, as the cost of doing business is much lower. There is plenty of talented labor available and established companies are focused on conserving capital rather than competing directly with new ventures.”
Here are this weeks tech and entrepreneur event for Portland (and elsewhere in Oregon). Check out the real-time data at calagator.org.
Monday, Jan 19, 2009
9:00 am, Geeks Day On
12:00 pm, OTBC brown bag: Your 30 Second Pitch
6:00 pm, SXSW Interactive Portland Meetup
6:00 pm, Permaculture Guild: Grow Your Own Produce slide show by Marisha Auerbach
7:00 pm, DorkbotPDX Meeting
Tuesday, Jan 20, 2009
7:00 am, Inaugural Breakfast B&O Style
7:30 am, Portland Business Alliance ShopTalk Showcase
12:00 pm, OTBC Legal Series: Protecting Your Intellectual Property
4:00 pm, SAO: Startup Exchange
6:00 pm, iPhone PDX
6:00 pm, SAO: Offshore Development Strategies
6:30 pm, Portland Java User Group – Clojure: Functional Programming for the JVM
7:00 pm, Wherecamp monthly meeting
Wednesday, Jan 21, 2009
7:30 am, Portland Business Alliance Forum: 2009 State Legislature Preview
8:30 am, SCORE: Business Basics for the Small Business Owner
5:00 pm, Corvallis Beer and Blog @ Fireworks
6:00 pm, TiE Oregon presents Software & Internet SIG – Business Platforms for Apps
6:00 pm, World Oil Supply: At the Turning Point? Presented by John Kaufman
6:30 pm, Personal Telco Project Weekly Meeting
7:00 pm, Online Community Managers PDX January Meeting (invite only)
7:00 pm, PLUG Advanced Topics: FreeTUIT – Codeless GUI Programming
Thursday, Jan 22, 2009
8:30 am, SCORE: Business Plan – Your Roadmap to Success
6:00 pm, Corvallis .NET Users Group – Geoff Dalgas of Stackoverflow.com – ASP.NET MVC
6:00 pm, IxDA Portland F2F Gathering (Interaction Designers)
6:30 pm, The Lightroom 2 Workflow Evening
7:00 pm, Westside Proggers
Friday, Jan 23, 2009
8:30 am, SAO: Upcoming Climate Proposals
12:00 pm, AeA Webinar: The Infamouns Elevator Pitch
Saturday, Jan 24, 2009
10:00 am, Calagator code sprint
4:00 pm, Calagator 1st year birthday party
There’s a lot coming up this week! I’m biased, but I’d suggest checking out the OTBC lineup this week:
- Tuesday: Finding Funds and Resources in Any Economic Situation
- Wednesday: Lunch 2.0
- Friday: Founders Friday
And on Thursday:
And if you’re curious about how SBA loans work, check out the SBA loan briefing on Wednesday.
Courtesy of Calagator.org, here’s the events coming up this week:
Monday, Jan 12, 2009
6:00 pm, Mobile Love, Android Style #8
7:00 pm, Portland Functional Programmers Study Group
Tuesday, Jan 13, 2009
7:30 am, Portland Business Alliance, Business Leads Exchange
8:00 am, SCORE: Internet Marketing I
12:00 pm, OTBC/SAO/OEN Lunch:Finding Funds & Resources
5:27 pm, SEMpdx: January 2009 Hot Seat: Inaugural PPC Event
5:30 pm, Hood River PubTalk
6:00 pm, WEO Oregon dinner meeting
6:00 pm, iPhone PDX
6:00 pm, Portland Data Plumbing User Group
6:30 pm, PDXPHP monthly meeting: Concrete5
7:00 pm, Portland Pythoneers January Meetup
7:00 pm, Open Source Bridge Content Committee Meeting
Wednesday, Jan 14, 2009
11:00 am, Lunch 2.0 Party Train to OTBC
11:30 am, SBA Small Business Loan Briefing
12:00 pm, Lunch 2.0 at the New OTBC Office
12:00 pm, NW China Council: Systainable Development in China
12:00 pm, Sustainable Development Business Opportunities in China
5:00 pm, Portland Business Alliance, Business After Hours
6:00 pm, Drinking and Drawing
6:30 pm, XPDX January: Lean Thinking for Agile Process Evolution
6:53 pm, Perl Mongers: chromatic presents, “How a Virtual Machine Works”
7:00 pm, CocoaHeads: Cocoa Programmers’ Group
7:00 pm, Intro to Permaculture Thinking (based on The Earth User’s Guide to Permaculture)
Thursday, Jan 15, 2009
7:30 am, AeA Finance Networking Event – SEC Accounting Update
7:30 am, Portland Business Alliance: “Savings and Sustainability”
5:00 pm, Corvallis Business After Hours January 2009
5:00 pm, OEN: Seed Oregon Round 3
6:00 pm, Portland WordPress User Group – First Meeting
Friday, Jan 16, 2009
4:00 pm, OTBC Founders Friday
Saturday, Jan 17, 2009
8:00 am, SCORE: Essentials for Starting your Own Business
1:00 pm, Masterbacon: A day for bacon lovers [NEW VENUE]
