Fred Wilson, author of the “A VC” blog, was recently interviewed by NYC 3.0, a website that follows the New York City start-up community. His post with the video is at this link. It’s a six minute discussion about his venture fund (Union Square Ventures), and his advice for entrepreneurs. Worth a 6 minute listen!
Archive
Here are some of the posts I ran across this weekend that I thought other entrepreneurs might find interesting:
Startup Operations
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Separating Your Personal and Business Finances – And Keeping them Separate
Legal
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Top 10 reasons why entrepreneurs hate lawyers
Bram Cohen: “Lawyers can’t tell you you can’t do something”
We need an independent invention defense to minimize the damage of aggressive patent trolls
Venture Capital
Entrepreneurship
I’ll be giving a seminar later today at OTBC on “How to (Prepare for and) Write a Business Plan”. One drawback of most of the business plan seminars I’ve seen is that they review what goes into a plan, but don’t really address the big question: what’s the homework that needs to be done before you sit down and start writing?
It takes some research and thought to put together a compelling, believable plan — one that will stand up to investor scrutiny. Here are the 12 steps I put together for today’s seminar:
- Start with a compelling, unmet need
- Define, size and segment the market – and prioritize the segments
- Validate the market
- Value price the product or service
- Analyze the competition
- Clarify your sustainable competitive advantage
- Decide on a strategy
- Decide on a sales and marketing approach
- Map out a 3 to 5 year action plan (this drives the assumptions for your financial projections)
- Develop 3-5 year financial projections
- Test and iterate 9 and 10 until the action plan & the projections are believable
- Your ready to write!
I’m sure one could add more steps, but these cover some of the most important aspects of a business plan. Whether you put it together in a complete business plan, or put together a compelling executive summary backed up by detailed financial projections and underlying assumptions. the work listed above is what it takes to be confident you have a business – and to convince an investor of that. It doesn’t take months to do. It can be done in weeks. And it’s worth doing!
You can find an extensive calendar of events of interest to entrepreneurs in the Portland area (and elsewhere in Oregon) at Calagator.org. Here are some options we thing would be of interest to entrepreneurs.
Events in the coming week
Mon – OTBC FastTrac TechVentures
Tue – Founder’s Coffee
Wed – OctoberBEST
Wed – Demolicious! – Portland Web Innovators
Thu – TechAmerica: 3 Ways To Triple Your Revenue
Thu – Portland Angel Network – Nov. meeting application deadline
Thu – OHSU: Achieving Meaningful Use of Electronic Health Records
Fri – DrupalCamp PDX 2009
Sat – MIPO: From Napkin Idea to Product in Market
For your Calendar – Events that are coming up
10/13 – OEN Workshop – Selling Stock in Your Company
10/14 – OEN PubTalk: – Seed Oregon – Round 1
10/16 – Bend Venture Conference
10/17 – Beaver Barcamp 4
10/20 – SAOpdx: StartUp Exchange Meeting
10/21 – Lunch 2.0 at Elemental Technologies
10/21 – OTBC: How to Write a Business Plan
10/21 – POSSE: Open Source Software in the Cloud
10/22 – OEN SwapMeet – October
10/23 – Corvallis Startup Weekend
10/28 – OTBC: How to Define, Size and Segment a Market
10/29 – OEN’s Venture Northwest 2009
11/05 – Willamette Innovators Night 2009
11/05 – OEN Workshop: Social Media with Ryan Lewis
11/11 – OTBC: How to Validate your Market
11/12 – OEN PubTalk: – Seed Oregon – Round 2
11/18 – CEO Roundtable – Go to Market Strategies: Reaching your customers with limited resources
11/18 – OTBC: How to Value Price your Product or Service
12/10 – OEN SwapMeet – December
You can find an extensive calendar of events of interest to entrepreneurs in the Portland area (and elsewhere in Oregon) at Calagator.org. Here are some options we thing would be of interest to entrepreneurs.
Events in the coming week
Mon – Mobile Portland — SMS, MMS & Short Codes: Existing Technology & New Opportunities
Tue – Founders Coffee
Tue – Starveups: Convergence Marketing
Thu – Premier of Gresham Area Pub Talks
Fri – WhereCampPDX 2009: Opening Party
Mon – OTBC FastTrac TechVentures
For your Calendar – Events that are coming up
10/06 – OEN Executive Series (TM) Practical Education for Challenging times
10/06 – Founder’s Coffee
10/07 – OctoberBEST
10/07 – Demolicious! – Portland Web Innovators
10/08 – Portland Angel Network – Nov. meeting application deadline
10/09 – DrupalCamp PDX 2009
10/13 – OEN Workshop – Selling Stock in Your Company
10/14 – OEN PubTalk: – Seed Oregon – Round 1
10/16 – Bend Venture Conference
10/20 – SAOpdx: StartUp Exchange Meeting
10/21 – Lunch 2.0 at Elemental Technologies
10/21 – POSSE: Open Source Software in the Cloud
10/22 – OEN SwapMeet – October
10/23 – Corvallis Startup Weekend
10/28 – TechAmerica: Patents – an In Depth Primer
10/29 – OEN’s Venture Northwest 2009
11/05 – Willamette Innovators Night 2009
11/05 – OEN Workshop: Social Media with Ryan Lewis
11/12 – OEN PubTalk: – Seed Oregon – Round 2
11/18 – CEO Roundtable – Go to Market Strategies: Reaching your customers with limited resources
12/10 – OEN SwapMeet – December
You can find an extensive calendar of events of interest to entrepreneurs in the Portland area (and elsewhere in Oregon) at Calagator.org. Here are some options we thing would be of interest to entrepreneurs.
Events in the coming week
Sep 21 – Micro Nano Breakthrough Conference
Sep 22 – OTBC: Sales for the Non Seller
Sep 22 – Business Plan Development Seminar – September
Sep 23 – OR BOD Education Series: Board Evaluations
Sep 23 – Linux Plumbers Conf 2009
Sep 23 – How to Access Federal Funding for Renewable Energy and Cleantech Projects
Sep 24 – Climate Change – Positioning Your Business
Sep 24 – SAOpdx: ConnectPDX
Sep 24 – OEN Tom Holce Award Celebration
Sep 25 – OTBC: An HR Checklist for Startups
Sep 26 – OTBC: Startup SpeedDating
Sep 26 – TechStart Uncork-Ed
For your Calendar – Events that are coming up
Sep 29 – OIF and OEN Big BBQ Bash
Oct 02 – WhereCampPDX 2009: Opening Night
Oct 06 – OEN Executive Series (TM) Practical Education for Challenging times
Oct 07 – OctoberBEST
Oct 08 – Portland Angel Network – Nov. meeting application deadline
Oct 13 – OEN Workshop – Selling Stock in Your Company
Oct 14 – OEN PubTalk: – Seed Oregon – Round 1
Oct 16 – Bend Venture Conference
Oct 21 – Lunch 2.0 at Elemental Technologies
Oct 22 – OEN SwapMeet – October
Oct 29 – OEN’s Venture Northwest 2009
Nov 05 – OEN Workshop: Social Media with Ryan Lewis
Nov 12 – OEN PubTalk: – Seed Oregon – Round 2
I watched the video of Roger McNamee’s presentation for the Aug. 21, 2009 Tech Alliance Tech Talk today. Roger has many years of experience investing in tech businesses. Here are some of his comments on web start-ups that target consumers:
(if you have) a web business, and you’ve got cash flow in a web business, … do not take money from anybody unless you really need it. The real problem in a web business particularly consumer ones is that you have to build the audience before it makes any sense to try to build the revenues
When somebody comes to me with an early stage thing and there’s a business model in it, I say to them “time out”. If you’re consumer focused I don’t think you can do it that way. The ad market is not good enough. It just won’t support you. So you’re better off doing what we’re doing in music, which is give it away for a while, build the audience. Why did I tell you that (music) story? Because that’s how you build consumer web businesses today.
Putting the comment into context, I don’t think Roger is saying that he doesn’t believe in business models for web companies – but he does believe that it takes consumer focused web companies 3 years or more to get enough of an audience to be in a position of implementing a revenue strategy. And expecting much revenue from advertising is not very realistic. That’s certainly good food for thought for any entrepreneur who plans to start a consumer web business. If that sounds like you, it’s worth watching the entire video. It’s pretty long (over an hour and a half) but there is some good content.
Roger also had some good advice for entrepreneurs who are raising money:
The guy with the money doesn’t care how good your opportunity is. The guy with the money wants to see that you understand all the risks and that you have them contained or eliminated. So in the battle of fear and greed, if you’re an entrepreneur raising money, eliminate the fear. Whatever is left over will push you over the line.
To say the investor doesn’t care about how good the opportunity is goes a bit far — but the point on understanding and addressing risk is spot on.
The early formation days of a start-up are exciting times. You’ve got lots of ideas, the team is psyched, and you find new opportunities every day. It’s easy to overlook some of the basic steps that you need to do to protect the company. Here are 7 things you should do to avoid some very common mistakes:
- Get written IP assignment agreements in place. Before any code is written – and even before significant ideas are contributed – talk to an attorney about getting Intellectual Property Assignment agreements in place. Everyone on the team who is contributing ideas, designs, code, etc. should sign an agreement assigning to the company all of the intellectual property they create for the company. If the company does not clearly own all of the IP, you’re asking for trouble. Don’t rely on the “we’re all friends” rationale. Things change, so take precautions. Do this early than you think you need to! But to be able to assign IP, you need to …
- Create a legal entity very early on. Whether its a corporation or an LLC, you’ll need a legal entity so that you have something to which you can assign the IP!
- Have team members sign NDA and non-compete agreements. In addition to IP assignment, all team members should sign a Non Disclosure Agreement and a non-compete agreement. If things don’t work out, and a team member goes off to do something else, you don’t want them revealing confidential material, or using your ideas to compete against you.
- Decide on Founders Stock split, and write it down. Once you create an entity, you’ll have to deal with the question of stock ownership (or percentage ownership, in the case of an LLC). You don’t want to put this off. Vague verbal understandings can lead to very unpleasant discussions down the road when one or more team members remembers or interpreted a discussion differently than you did. Agree on the split, make sure everyone agrees its equitable, and write it down!
- Implement a “buy back” agreement for founders stock. Once you decide on a founder’s split, have an attorney put together a stock purchase agreement for founders shares. Yes, you’ll probably want founders to buy their shares ( for a very small valuation – ask your attorney about that). But protect the company by having the attorney include a ” buy back” provision. This works somewhat like stock option vesting. The idea is that if a founder leaves the company (or is asked to leave) in less than some agreed upon time (less than 4 years would be typical) the company has the right to buy-back some portion of their stock, probably at the same very low price for which they bought it. If you have a founder who owns 20% of the company and decides to leave after 6 months, you don’t want him or her to walk away with 20%! Buy-back agreements are typically declining. In other words, if a founder leaves after 1 year, maybe the company has the right to buy back only 75% of the shares (the founder keeps 25%). After two years, the buy-back right might shrink to 50%, and perhaps to 25% after three years, and then to zero after four years – meaning that the shares are “vested”. If a founder leaves in less than a year, the company should probably have the right to buy back the vast majority of his or her shares.
- Set up a company checking account. Early on, founders typically co-mingle personal funds and corporate funds (i.e., paying for things for the company out of personal checking accounts). Stop doing that! Set up a company checking account, and have the founders put money into it, and make expenditures out of that account. That way, you’re actually tracking your company expenses, and you’re also tracking exactly how much out-of-pocket funds are being contributed by the founders. (You might even want founders to get preferred shares for the money they’ve put in – but that’s a longer discussion!)
- Make sure founders complete the 83(b) form. Within 30 days of purchasing your founders share, be sure to complete and submit an 83(b) form to the IRS. Otherwise, if the shares ever end up having any value, you’ll get some nasty tax surprises. The attorney who sets up your stock purchase agreement should be on your case about this. But if not, you’ve been warned!
You’ve probably seen classic start-up setup mistakes too. Please add your advice in the comments!
From Calagator.org, here are upcoming events for entrepreneurs:
Key Events
Aug 04 – Portland Ten Startup Workout – “Basics of Sales for Startups”
Aug 05 – OEN Webinar: The Principles of IP Valuation
Aug 05 – Congressman Earl Blumenauer: China, Global Warming, & Clean Energy
Aug 11 – FastTrac® Startup Boot Camp
Aug 11 – Funding Innovative Research: SBIR/STIR Conference
Aug 12 – Secrets of NIH Small Business Grant Applications
Aug 12 – OEN Pub Talk – So You Think You Can Pitch?
Aug 25 – Silicon Forest Technology and Financial Forum
Sep 16 – Sustainable Industries Economics Forum
Sep 21 – Micro Nano Breakthrough Conference
Sep 24 – Climate Change – Positioning Your Business
Sep 24 – OEN Tom Holce Award Celebration
Sep 26 – TechStart Uncork-Ed
Oct 07 – OctoberBEST
Oct 10 – Startupalooza II
Oct 29 – Venture Northwest 2009
All Events
Monday, Aug 03, 2009
10:00 am, The Career Circle
12:00 pm, West Side PDX Job Search Group
7:00 pm, DorkbotPDX informal meeting
Tuesday, Aug 04, 2009
7:30 am, Portland Business Alliance presents ShopTalk Showcase at Homestreet Bank
1:00 pm, Portland Ten Startup Workout – “Basics of Sales for Startups”
7:00 pm, Portland Ruby Brigade monthly meeting
Wednesday, Aug 05, 2009
8:00 am, SCORE: 10 Secrets of Distinctive Products
8:00 am, SCORE: 10 Secrets of Distinctive Products
10:00 am, OEN Webinar: The Principles of IP Valuation
11:30 am, Vendor Selection: International, National, Regional or Local?
12:00 pm, Lunch 2.0 at Slate Technologies
12:00 pm, Congressman Earl Blumenauer: China, Global Warming, & Clean Energy
Thursday, Aug 06, 2009
8:30 am, SCORE: Business Basics
11:30 am, SBA Loan Briefing
12:00 pm, Are you networking effectively? How to turn your natural network into your referral team
4:00 pm, SAOpdx ConnectPDX
Friday, Aug 07, 2009
11:00 am, Why do I need Social Networking for my Business? Yes, you can do it less than one hour a week.
Saturday, Aug 08, 2009
12:00 pm, Bear and Blog at Bagby Hotsprings
5:00 pm, DorkbotPDX 0×04 (tentative)
5:00 pm, DorkbotPDX 0×04 (tentative)
Sunday, Aug 09, 2009
7:00 pm, DorkbotPDX 0×04 – NYC invasion
Monday, Aug 10, 2009
12:00 pm, West Side PDX Job Search Group
3:00 pm, Teleseminar: What are your Businesses’s Strengths and Weaknesses?
7:00 pm, Portland Functional Programming Study Group
Tuesday, Aug 11, 2009
7:30 am, Speed Networking! Portland Business Alliance presents Business Leads Exchange
8:30am FastTrac® Startup Boot Camp
9:00 am, Funding Innovative Research: SBIR/STIR Conference
1:00 pm, Portland Ten Startup Workout – “Market Validation Basics”
6:30 pm, Drizzle, Gearman and their PHP API’s
Wednesday, Aug 12, 2009
11:30 am, Secrets of NIH Small Business Grant Applications
5:00 pm, Portland Business Alliance presents Business After Hours @ Morton’s The Steakhouse
5:15 pm, OEN Pub Talk – So You Think You Can Pitch?
5:30 pm, August Springboard Social Innovation Forum: Year-Round Harvests
Thursday, Aug 13, 2009
8:30 am, SCORE: Internet Marketing
3:00 pm, “Doing Business in the United Kingdom” A Case Study in Software
4:00 pm, Portland Ten Startup Workout – “The Fundability Matrix – What Angel/VC Investors Look For, And How You Stack Up”
Saturday, Aug 15, 2009
5:00 pm, Dorkbot Pd Workshop #2 (tentative)
According to Venture Beat, VCs raised the fewest funds in Q2 since 1996:
VCs raised 25 funds for a total of $1.7 billion. That’s the smallest amount of money raised in any quarter since 2003, and the lowest number of funds since 1996. It even represents a major decline compared to the first three months of the year, when firms raised $4.6 billion for 49 funds.
And VentureBeat also reported that VCs invested $3.7 billion in startups in Q2 - $2 billion less than VCs raised. There have been posts from VCs in the past few months talking about he “Venture Capital Math Problem” (one noteable example is Fred Wilson’s post) basically arguing that there’s more money in the VC system than can be productively used.
Here are the quarterly VC fund raising numbers since Q2 2007 from Thomson Reuters and the National Venture Capital Association:
As Adeo Ressi points out, a large portion of the fund raising in the first half of 2009 was done by new funds, many of them managed by entrepreneurs looking to bring about change, such as Marc Andreesen and Ben Horowitz. Still, it looks like the market is beginning to adjust to the new VC math, and that could make for an even tougher period of fund raising for start-ups.
