San Francisco, CA and Austin-TX-based MicroVentures, the only combined equity crowdfunding platform and broker-dealer in the US, announced says that accredited investors on their platform have invested $16 million in startups.
With investments in 34 companies, MicroVentures has now invested more with legal, accredited investors than any other equity based crowdfunding platform.
MicroVentures employs a crowd-sourcing process that enables the power of the crowd to decide which startups will receive investments in an effort to provide a higher probability of successful outcomes. Further, MicroVentures has a dedicated due diligence team that screens out companies that may have potential growth inhibiting challenges.
Tim Sullivan, CEO of MicroVentures, said, ”As we patiently wait for the SEC to enact rules around the JOBS Act, we are utilizing traditional securities laws to connect startups with great investors. This is only possible as a result of our being one of the only registered broker dealer in the space. This is the first time ever that accredited investors have had the ability to invest alongside VC’s without taking major stakes and ending up with similarly diversified portfolios. However, we may find that the crowd does an even better job at picking winners.”
He added, “We’ve reached a milestone that proves that our platform doesn’t just ‘work’ — but that there is significant demand from smaller investors to take part in this asset class.”
Invests in seed stage startups
MicroVentures’ platform invests primarily in seed stage startups, but will participate in follow on rounds alongside the VCs throughout the life of a company.
For example, visual book publishing platform Graphicly (www.graphicly.com) and rich media advertisement platform Republic Project (www.republicproject.com) have both received multiple investments from MicroVentures as they have continued to gain traction and required additional capital to accelerate their growth.
Other investments include SupplyHog (www.supplyhog.com), a Tennessee-based company that operates a platform that streamlines the process for buying building supplies and material online, along with Kickfolio (www.kickfolio.com), the first foreign management team, who have created a platform that enables developers to run iOS app demos in a standard web browser.
“Our platform has created the opportunity for our investors to invest in everything from seed stage startups to huge companies such as Twitter and Facebook through secondary transactions. We’re giving investors the chance to participate and the transparency to make decisions in a way they have traditionally never been able to,” said Sullivan.
Chaitanya ‘Chet’ Kanojia, CEO, founder of AEREO, will participate in the upcoming Digital Summit in Atlanta.
AEREO has stirred up a hornet’s nest of contention in the television space, offering a cloud-based antenna and DVR technology that lets consumers watch live or recorded TV broadcasts on Internet connected devices.
With cable-cutting a real threat to satellite and cable TV providers, this is just one more wrinkle threatening their business models.
It’s not often you see a startup immediately threatening the major players of an industry, but AEREO has managed it. The company, which launched in February 2012, is venture-backed by IAC, FirstMark Capital, First Round Capital, Highland Capital Partners, High Line Venture Partenrs, Lauder Partners, and SV Angel.
Broadcasters, satellite and cable companies lost a battle in court to stop AEREO with an injunction, however. The Second Circuit Court of Appeals said a U.S. District Judge was correct in refusing the injunction.
The suit was brought by Fox Television Stations Inc, Twentieth Century Fox Film Corporation, Wpix Inc., Univision Television Group Inc, the Univision Network Limited Partnership, WNET, Thirteen, and Public Broadcasting Service. They have vowed to continue the fight.
Time Warner Cable, on the other hand, has said it might emulate AEREO’s business model and grab over the air broadcasts and deliver them to customers via Internet connections.
It’s all an ongoing controversy. You can hear from AEREO CEO and founder Chaitanya “Chet” Kanojia at the TechMedia’s Digital Summit in Atlanta next week (May 14-15), where he’ll join more than 100 other digital thought-leaders participating in the event.
TechMedia events have had controversial guest before (such as the Winklevoss twins, who challenged Mark Zuckerberg over Facebook’s creation).
Previously, Kanojia was the founder and CEO of Navic Networks, the industry leader in advanced television advertising. Navic Networks was subsequently acquired by Microsoft in 2008. Chet holds more than 14 patents in fields ranging from robotics to data communications systems, is an innovative leader known for pushing beyond the conventional and developing breakthrough solutions.
TechJournal plans an interview with Kanojia ahead of the Summit if possible.
In a new nationwide survey conducted by TheStreet’s (NASDAQ: TST) MainStreet.com site and GfK 44 percent of Americans are concerned about losing their jobs. Initiatives, such as the Jumpstart Our Business Startups (JOBS) Act, aimed at launching new businesses which could in theory offer employment opportunities, hasn’t had much impact yet.
“The underlying rationale behind the JOBS Act — as long as it doesn’t get screwed up — is incredibly powerful and necessary for our country right now,” says Ryan Feit , the co-founder and CEO of SeedInvest. “Innovation and jobs are at stake with the JOBS Act. The fact that it’s taking so long is frustrating, but it’s not a secret that raising capital is an antiquated process.”
Just over 30% of respondents were aware of the JOBS Act; of that group more than 60% didn’t feel the JOBS Act had created employment opportunities in their region
36% of Western region respondents felt unemployment had dropped in their area followed by the Midwest (34%); South (31%) and Northeast (30%)
27% of Americans were not confident they could find work if they lost their jobs today
Read Ross Kenneth Urken , MainStreet’s personal finance editor, analysis of the survey featuring expert commentary here.
Eighty-four percent of entrepreneurs said they are confident or very confident in their companies’ prospects for profitability in the next 12 months, which is the highest confidence level since the survey launched early last year and reflects a 1 percent increase over the fourth-quarter 2012 survey.
Furthermore, confidence levels of the youngest entrepreneurs – those 18 to 30 years old – started to rebound, as 96 percent reported they were confident or very confident that their businesses’ profitability will increase in the year ahead, a 3 percent jump over fourth quarter 2012.
This is just the latest of a number of surveys showing that small businesses, startups and even private equity firms are showing more confidence about their businesses than they have in years, despite concerns about the overall economy and political machinations.
Granular feel for entrepreneurial sentiment
“The findings of this survey from quarter to quarter provide an important gauge for entrepreneur sentiment, which plays a significant role in their business decisions,” said Dane Stangler, director of research and policy at the Kauffman Foundation. “This also is a way to give entrepreneurs, who are as diverse as their companies, a collective voice.”
Confidence levels among other age groups fell as the entrepreneurs’ ages increased. Nevertheless, even entrepreneurs aged 61 and older – the oldest category – expressed 73 percent confidence in 2013 profitability.
“These reports continue to benchmark entrepreneurial confidence across the country,” said John Suh, CEO of LegalZoom. “They also provide a more granular feel as to how an entrepreneur’s experience with consumer demand and perceived outlook on the economy may impact the decision to hire.”
No so optimistic about overall economy
Despite their optimism for their own companies’ profits in the year ahead, entrepreneurs’ faith in U.S. economic growth deteriorated from fourth quarter 2012. Just 39 percent said they expected the economy to improve over the next 12 months, compared to 44 percent in the previous quarter’s survey.
The number of entrepreneurs planning to hire more employees also declined. In fourth quarter 2012, 37 percent of the respondents planned to hire. In the most recent survey, only 32 percent expected to hire more employees in the next 12 months.
Entrepreneurs’ outlook for consumer demand dipped with 44 percent expecting an increase in customer demand, down from 45 percent in the previous survey.
The Kauffman Foundation sponsors the Startup Confidence Index surveys in conjunction with LegalZoom, a leading national provider of online legal solutions and legal plans to young companies.
The findings are based on 1,650 responses to a nationwide, February 2013 survey distributed via email to LegalZoom customers who formed their entities within the last 12 months. The Index is conducted quarterly to gauge entrepreneurial confidence.
View the Kauffman LegalZoom Startup Confidence Index infographic. Follow the conversation online at #startupconfidence.
Time Inc. today unveiled its third annual list of the 10 NYC Startups to Watch for 2013.
Each Spring, editors from Time Inc. brands, including TIME, FORTUNE, CNNMoney.com, PEOPLE, Sports Illustrated, Entertainment Weekly, InStyle and Real Simple, comb New York’s technology scene to discover the ten most promising startups of the past year.
This year’s diverse list spotlights New York City-based companies with the most potential to transform areas from shopping, personal health and dating to customer service, social media, and data analysis.
Past honorees that have experienced considerable success include the curated design shop Fab (2012), which now has 10 million members and is reportedly valued at $1 billion; eyewear designer and retailer Warby Parker (2011), which recently opened its first flagship retail store in New York City, and Stamped (2012), which was Marissa Mayer’s first acquisition at Yahoo!
NYC startup scene hotter
“Each year, the temperature of NYC’s start-up scene seems to get turned up another five degrees, with 2013 yielding by far the largest number and widest spectrum of companies for our judging committee to consider,” says Time Inc. Style & Entertainment Group Editor Mark Golin.
“As journalists, it’s our job to bring news of the latest digital products, services and trends to our audiences. But, as a media company looking to lead in a rapidly evolving industry, Time Inc. ends up winning every bit as much as the companies that made this list by allowing ourselves to be inspired by their innovative example.”
Time Inc.’s “10 NYC Startups to Watch” in 2013 are:
ARCHETYPEME: ArchetypeMe redefines ‘personal’ search and discovery by placing users within a community of like-minded people where they’ll receive original, relevant content and videos.
CUSTORA: Custora is a marketing analytics platform that helps leading online retailers like Birchbox, Etsy, and LivingSocial identify and keep valuable customers.
FIFTYTHREE: FiftyThree builds tools for creativity – they crafted the breakthrough app, Paper, named Apple’s App of the Year. Userswho have relied on traditional journals and notebooks now have a professional-quality app for drawing, graphing and coloring on a tablet.
FITOCRACY: With more than 1 million users, Fitocracy is a workout tracker and social network that empowers users to succeed at fitness by connecting them to communities just like them and providing guidance to help reach their goals.
GROUPER: A dating site with a twist, Grouper matches two groups of friends together based on information pulled from their Facebook profiles and then arranges a destination for an offline blind group date.
HUKKSTER: Hukkster is a digital platform that allows shoppers to track products at more than 1000 popular online stores – from Asos to Zappos – and get notified when those products go on sale.
IMRSV: A breakthrough in real-world, real-time data analysis, IMRSV’s Cara software transforms web cameras into intelligent sensors that capture data including age, gender and attention time.
KLOOFF: A smartphone app for pet owners who love their pets, Klooff lets users share photos, meet people with similar animals, create customized products and much more.
QWIKI: Qwiki, already a leader in automated video production, recently released an iPhone app that automatically creates beautiful movies from the events captured on your iPhone.
UPWORTHY: Upworthy’s mission is to lift up things that matter using irresistible social media – to make really important issues as shareable as a video of a guy jumping on his bed and falling out the window.
For more information on Time Inc.’s 10 NYC Startups To Watch, you can find it here, or on Facebook.
In the current financial climate, new high-tech businesses rely more than other firms on outside loans and investments, while non-technology businesses owned by African Americans, Latinos, and women simply operate on less capital, says a report issued today by the U.S. Small Business Administration (SBA) Office of Advocacy.
The report, called Access to Capital among Young Firms, Minority-owned Firms, Women-owned Firms, and High-tech Firms looks at how the changing financial environment affects new firms.
“We know that startup businesses with access to financing drive innovation, job creation, and economic growth,” said Dr. Winslow Sargeant, Chief Counsel for Advocacy.
“Policies that help close the financing gaps for minorities and women and for high-tech startups will benefit the whole economy.”
Minority firms rely more on their own funds
The author, Alicia Robb , finds that minority firms in particular rely more on their own funds—and have less capital to start up and grow. High-tech businesses that rely on patents, copyrights, and trademarks also faced bank financing hurdles, possibly because their products rely on knowledge, which is harder for banks to assess than physical assets.
The report uses data from the Kauffman Firm Survey to look at new businesses’ access to capital during the 2004-2010 period.
African American and Latino owners of young firms are less likely than others with similar credit scores to have access to bank financing. During the financial crisis, women and minority owners of new startups were less likely to apply for credit, fearing loan denial.
The Office of Advocacy, an independent office that serves as the voice for small business within the federal government, sponsored the report. The full report is available on the Office of Advocacy website at http://www.sba.gov/advocacy/7540.
Eighty seven percent of technology startups plan to hire new employees in 2013, according to an interactive report bySilicon Valley Bank, financial partner to technology, life science and cleantech companies and their investors worldwide.
In the US, this is up 14% from four years ago when the annual survey began. SVB’s Startup Outlook study, conducted in the US and the UK, also reveals that software companies plan to do the most hiring, with 90% planning to increase the size of their workforces this year.
The Startup Outlook report is based on a survey of more than 750 startup executives across the US and 125 in the UK.
The interactive report details the technology sectors and geographies in the US and the UK that are looking for employees with both STEM (science, technology, engineering, math) and general business skills.
Job seekers will find locations with the greatest need and job types in particularly high demand. Eighty-two percent of startups in the US, and 77% in the UK, said that they are looking for people with STEM skills.
One place to hunt for these jobs is via the portfolio listings of Venture Capital firms, which generally include links to the startup websites.
A bright spot in the economy
“Tech companies are a bright spot in the economy worldwide, which is evident from the significant number of startups in the US and the UK that expect to grow and hire this year,” said Greg Becker, president and CEO of Silicon Valley Bank.
“There is a lot of opportunity to put people to work at startups, which is particularly welcome news since jobs in general are recovering slowly. Investments in STEM education and policies that support tech businesses will help people take advantage of jobs, and benefit economic growth overall.”
In the US, startups in major technology hubs nationwide reported challenges finding workers with the skills they need and those numbers were highest in Texas (94%), followed by Washington (91%). In the UK, 69% of startups reported trouble finding qualified engineers.
Silicon Valley Bank conducted its fourth annual Startup Outlook survey in the US and its first survey in the UK in December 2012.
For the purposes of this study, startups are primarily defined as companies in the innovation sector with less than $100 million in annual revenue and fewer than 500 employees (US) or less than £25 million in annual revenue and fewer than 100 employees (UK). Just over 40% of the startups that are hiring in both the US and the UK had fewer than 10 employees at the time of the survey.
Here’s yet another way to raise money via the crowdfunding meme.
Crowdtilt , the simple-to-use platform to pool money online,has closed a$12 million Series A funding. Launched in February 2012, San Francisco-based Crowdtilt is a simple way for groups to pool money online.
The round was led by Andreessen Horowitz, with participation from Sean Parker, SV Angel, DCM, as well as CrunchFund, Alexis Ohanian, Elad Gil, Naval Ravikant, Sam Altman, Matt Mullenweg, Dave Morin and Justin Kan. Also joining Crowdtilt’s board of directors is Jeff Jordan, partner at Andreessen Horowitz and former CEO of OpenTable.
The investment will support the explosive growth of the company, while further improving the product and user experience.
Fantasy football to community fund-raisers
Crowdtilt is being used for everything from collecting money for a fantasy football league among friends, all the way to an entire community rallying together to save their iconic toy store from closure.
Crowdtilt’s API, currently in closed beta, also allows anyone to create their own crowdfunding application, such as group payments, pre-sales commerce options, complete standalone crowdfunding applications or even social fundraising sites.
“Manual processes for coordinating payments across groups is inefficient and increasingly obsolete. Crowdtilt has built a highly efficient platform that is being used by all kinds of groups for all kinds of use cases — buying movie or concert tickets, collaborating on gift or travel spending, even funding school programs or public works projects. It is a robust collaborative payments platform for an increasingly collaborative web,” said Jeff Jordan, partner at Andreessen Horowitz.
The report shows angel investing for the year was stable with prior years. Pre money valuations for early-stage companies remained steady at $2.5M and round sizes were relatively consistent.
The sectors and geographies getting funding are shifting, however, most notably with mobile and telecom companies gaining share of angel investment deals and dollars, while healthcare companies are losing share of angel investments. Companies in the Northwest and the Southwest US are gaining ground on the number of deals and total investments they receive over companies in California and New England.
This infographic details the report’s findings:
Angels playing important role
“Angel investors continue to play an important role in funding startups,” said Rob Wiltbank, Vice Chairman of Research, Angel Resource Institute.
“The steady valuation, growth in investment size, and wide geographic activity among angel investors is more evidence that angels are a reliable and a critical part of growing the next generation of great new companies in this country.”
One new company in the mobile sector benefitting from angel investment is GlobeSherpa, based in Portland, Oregon. “We are entirely angel funded,” said Nat Parker, CEO of GlobeSherpa, a mobile ticketing software company.
“We are disrupting legacy payment systems and ticket machines with extremely convenient mobile tickets that consumers can purchase and use with their smart phones. In the process we’re helping transit systems save millions of dollars and we are able to do this on the backs of our angel investors who put their trust in us.”
Median angel round sizes hit a five quarter high at $690K in Q4 2012 for the second quarter in a row, and ended the year at $600K, down from $625K in 2011 and up from $500K in 2010. When angel groups co-invest with other types of investors, the median round size is higher at $1.5M.
Pre-money valuations in early stage companies remain steady at $2.5M for both 2012 and 2011.
Mobile and telecom companies gained share of angel investment deals and dollars in 2012, responsible for 13% of all investment deals and receiving 14% of angel group dollars, which was more than double its share in 2011. Internet and healthcare companies still receive more than half of angel group investments, although healthcare investments dropped significantly to 27% share in 2012 from 35% share in 2011.
Sixty three percent of companies that received angel group investment had revenue and 44% were follow-on rounds, as opposed to new investments.
Most Active Angel Groups 2012 – Deals
New York Angels
New York, NY
Tech Coast Angels
Launchpad Venture Group
Central Texas Angel Network
New York, NY; Boston, MA; San Francisco, CA
6 / New
Sand Hill Angels
Alliance of Angels
Companies in the Northwest and Southwest regions of the US grew their share of both angel deals and dollars over 2011. California and New England continue to see the majority of deals and investments, yet 69% of angel investment deals are done outside those regions. Share of investments in California companies dropped to 23% share in 2012 from 31% in 2011. Investments in New York remained flat.
Additional data in report
The Halo Report includes aggregate analysis of investment activity by angels and angel groups and highlights trends in round sizes, location and industry preferences. The data is collected via survey and aggregation of public data using CB Insights innovative data analyses.
The 2012 Halo Report data is based on 783 deals totaling $1.1 billion dollars invested. The transaction details are available in the CB Insights subscription database for users to review and analyze themselves. Academics may also access some of the data through ARI.
Angel groups and individual angel investors interested in including their data in the Halo Report should contact Sarah Dickey, ARI Research Director, for details. She can be reached at 913-894-4700 and firstname.lastname@example.org.
Chris Shaw, an Entrepreneur-in-Residence at Kansas City-based startup accelerator and business incubator Think Big Partners has been selected by Google to be a beta tester of its exclusive Glass hardware.
Google selected 8,000 people worldwide to be part of its Glass Explorers program, an initiative to test the limits of the Glass wearable computer hardware.
Connects to mobile phone
Google Glass is a head-mounted display unit that connects with the user’s mobile phone to allow for seamless communication over the web. Glass also has a video camera that allows for pictures and video to be streamed over the web.
Chris Shaw, a serial entrepreneur who founded LexSpot and has advised over a dozen technology startups, said he wanted to use Glass to give back to the community that enabled his success.
“Glass is a truly innovative way to tell stories and share experiences,” says Shaw. “While our primary use for Glass will be for developing mobile applications in spaces like healthcare and enterprise, we wanted to test the media capabilities of Glass in a unique way.”
Tech Trek documentary
As a result of this thought, Herb Sih, Founder and Managing Partner of Think Big Partners encouraged Chris to create Tech Trek, a Glass-enabled documentary that explores the different startup hubs, technologies and innovations throughout the country.
“When Chris said he wanted to give folks a birds-eye view into what it’s like to be an entrepreneur, we were enthusiastic to support Tech Trek,” says Sih. “Think Big has started dozens of companies either directly or indirectly and we feel like we have an obligation to give back to the community.”
Tech Trek is using Kickstarter to raise funds for the ambitious project to tell the story of technology entrepreneurship in the tech hubs of Silicon Valley, Ca., Los Angeles, Ca., Las Vegas, Nv., Boulder, Co., and Kansas City, Mo.
Funds will sponsor entrepreneurs
In addition, Shaw explains that some of the funds from the Kickstarter campaign will be used to sponsor entrepreneurs to attend Tech Trek who cannot afford to visit the cities and companies that Tech Trek will feature at incubators like Y Combinator, 500 Startups, Science and TechStars.
“Our goal with Tech Trek is to show people what we do and how technology and entrepreneurship are building the future of our world,” says Shaw.
Spencer Walsh is an independent film producer and director who will be filming and producing Tech Trek.
“Google Glass provides a very unique opportunity for documentary work. I’m already excited to capture the effect this new technology has on the people interacting with it physically and virtually,” explains Walsh.
“Also, most of my productions are for startups so I know how creative entrepreneurs are. In my opinion, the possibilities of Glass will really begin to reveal themselves as Chris interacts with these established and growing communities. This might be selfish, but I feel like I’ll be getting a glimpse into the near future.”
Despite a challenging yearfor venture capital investment in 2012, the U.S. VC-backed industry remains substantial. Better portfolio company exits and returns suggest the slump in fundraising could be over in 2013, according to Ernst & Young’s tenth annual Venture Capital Insights and Trends Report.
According to the report, there is evidence of money flowing into companies that are perceived as lower risk. For example, there is a shift away from social media towards enterprise– the companies that are attracting greater VC interest are those that provide a service and are getting paid for it, rather than those that have a good idea, but have difficulty monetizing it.
Historically, the U.S. venture industry has been dominated by investments in technology and healthcare since in the U.S. more than half of the VC pool consists of companies in these two sectors.
Healthy exit environment crucial
Though U.S. VC investment activity overall declined by 15 percent to $29.7 billion in 2012 compared with 2011, and the number of investment rounds also fell, the drop was not as pronounced, declining by only four percent to 3,363. These U.S. numbers compare to global VC declines at 20 percent in amount invested and eight percent in deals.
“While 2012 was a tough year for global venture capital, the U.S. held relatively steady,” said Bryan Pearce , Director, Venture Capital Advisory Group, Ernst & Young LLP. “However, a healthy environment for venture backed company exits will be crucial for the U.S. VC industry outlook in 2013. Equity markets have started the year positively, which suggests these better exit prospects may materialize.”
Exit activity is also an important pre-condition for an uptick in fund-raising by VC firms. While global exits of VC backed companies declined by 27 percent in terms of amount raised and by 30percent based on the number of IPOs, the number of VC-backed IPO exits and the capital raised in the U.S. were relatively stable, after adjusting for the Facebook IPO proceeds of $6.8 billion.
Companies exiting via IPO are typically more advanced than those exiting via M&A. The median amount raised prior to IPO of$78.4 million and time to exit of 7.4 years, far exceeds the respective figures of $16.7 million and 5.1 years for M&A exits.
A number of venture capitalists who participated in the recent Southeast Venture Conference (SEVC) in Charlotte, NC, noted that most firms today are going to exit via M&A and should consider that from the very beginning.
VC model is realigning VC firms are rethinking their investing strategies favoring investing smaller investments, at a later stage and on tougher terms.
This shift reflects two trends – the substitution for VC fund money in early stage companies by Angel investors, incubators/accelerators and corporate initiatives as well as a need to demonstrate a shorter time to exit in order to return capital to their investors, show a track record of success and, thus, start the process of opening and raising a new fund.
“The flow of capital being returned to LP investors has slowed significantly, which in turn has restricted investors’ ability to re-invest in new funds,” added Pearce. “Therefore, investors are showing a preference for the most successful ‘brand’ name funds, seeking out depth of experience and track record. They are also demanding better terms from VC funds, while the funds are requiring portfolio companies to meet stricter milestones and meet tighter time frames.”
Increasing role of corporate venture Corporate venture investing is on the rise surpassing pre-dotcom levels in 2012. Corporate venture activity is especially strong in the IT sector and being driven by a combination of healthy corporate cash balances and corporate seeking external innovation due to the rapid pace of technological change as the rise of mobile, big data and cloud computing has created a disruptive business environment.
Corporations are eager to invest in venture-backed companies that can help them fill the innovation deficit in their strategy and innovation capabilities. The link between corporate investment and ultimate acquisition, however, is not always present in the U.S. In all sectors in the US only 2 percent of companies were acquired by an existing corporate investor in 2011 and 2012.
“In 2012, corporates cemented their important role in the VC ecosystem,” continued Pearce. “Where they choose to make an investment, typically in the later stage in the U.S., the valuation of the business in that round was usually greater than in companies at a similar stage with no corporate investor.”
U.S. Regional Outlook As of January 2013, $167.9 billion was invested in 8,288 companies. Investment remains heavily weighted towards Silicon Valley –since 2000, cumulative equity raised in the Bay Area of $62.2 billion exceeds the total raised in New York, New England and Southern California - the next largest hotbeds – combined.
These same areas also ranked top five globally in terms of number of deals. New York witnessed the largest increase of active VC investors, approximately 150 percent in 2012 compared to 2006.
At the SEVC in March, one VC noted that it took substantially more investment dollars to get those West Coast firms to an exit. East Coast firms, he noted, used their capital more efficiently. A number of VCs at the event said they were actively seeking to diversify geographically and specifically interested in regions such as the Mid-Atlantic and the Southeast.
The data in our Turning the corner: Global venture capital insights and trends 2013 report has been sourced from Dow Jones VentureSource.
Draper University, a cutting edge boarding school for young entrepreneurs from all over the world, will launch its first session on April 17, 2013. Students learn the fundamentals of starting a company, then create a business.
Three student businesses created in a pilot program have already received funding.
The university, located in downtown San Mateo, oreffers an innovative program designed to inspire, cultivate, and educate students who dream to build companies that change the world around them. Draper University will offer four eight-week sessions a year and is intended for entrepreneurs between the ages of 18 to 26.
The program curriculum teaches startup fundamentals combined with personal mentoring and fun, experiential activities, which include a steady stream of events connecting students with the entrepreneurial world of Silicon Valley.
Pitch workshops, media training, survival skills
Activities include public speaking, media training, pitch workshops, urban and rural survival skills, banking and finance, lie detection, yoga, car racing, future projection exercises, speed reading, and business simulations. Students are taught and mentored by guest speakers who are experienced real-world ‘practitioners’ who are change agents in their industry.
“I started this school because I believe the world needs more heroes. By training a few select entrepreneurial heroes each quarter, I think that Draper University can start to help save the world economy, cure any disease, explore new worlds of innovation, and spread free markets and competitive governance,” said Tim Draper, founder and managing director at Draper Fisher Jurvetson and founder of Draper University.
Each student will create a business, or refine their existing business, over the duration of the program, which culminates with a business pitch competition to a panel of venture capitalists, where students have the opportunity to obtain funding for their business.
In June 2012, Draper University held a four-week pilot program with 40 students and provided the opportunity test the curriculum before officially launching.
Three of the students received funding while Surbhi Sarna, Founder and CEO of nVision Medical Corporation, won the competition.
Campus includes “The Collective”
“Winning the business plan competition at Draper University changed the way I see my business and gave me confidence to tell my story,” said Sarna. “It also exposed me to a vast network of investors in the bay area, and I am excited about closing my next round and getting our device into the hands of physicians.”
Further attracting entrepreneurs and promoting their success, the Draper University Campus includes “The Collective,” a three-story entrepreneurial center across the street (open in late May 2013).
The Collective, a co-working space open to Draper University students and non-affiliated entrepreneurs and startups, promotes innovation, collaboration and community with its peer-to-peer work environment. The Collective will also offer pop-up retail space that can be rented on a short-term basis, and a theater/speakers forum that can be rented on the evenings and weekends for large events.
Even though Peak 10, the Charlotte-based data center and managed services provider now has 350 employees, CEO David Jones says the company still tries to foster an entrepreneurial spirit.
“We don’t make all our decisions centrally,” says Jones.
Jones co-founded Peak 10 in March of 2000 and has led the company to a top market position as a leading independent data center, managed services, and cloud computing solutions provider in the United States, with facilities in Charlotte, Atlanta, Jacksonville, Cincinnati, Louisville, Nashville, Tampa, South Florida, Raleigh, and Richmond.
Participating in the Southeast Venture Conference
Jones, who speaks often to entrepreneurial groups and is a past chair and still a director of the North Carolina Technology Association, is one of dozens of thought-leaders, venture capitalists, angel investors and entrepreneurs participating in the Southeast Venture Conference in Charlotte, NC, March 13-14.
“I think it’s going to be a great event for Charlotte,” Jones says. “It has an informative agenda, not the same old stuff you usually see at conferences. It’s going to bring a lot of faces into Charlotte who don’t normally spend time here.”
The Southeast Venture Conference is headed to Charlotte, NC, in March 2013. The event offers firms a chance to present to top national venture capitalists and angel investors.
Specifically, that includes speakers and panelists from national and regional venture capital firms and 50 innovative presenting companies from the Southeast and Mid-Atlantic regions. Last we heard, there were only a handful of seats left for the event, so it’s a good idea to reserve yours now if you plan on attending.
Part of the Peak 10 entrepreneurial culture derives from its growing an average of about 25 percent a year and regularly opening new facilities to meet demand in the areas it serves.
Four pieces of advice for entrepreneurs
We asked Jones what advice he thinks is most important to starting a company.
First, he says, “Stay focused. We’ve all heard stories of companies that try to do too many things at once and don’t do any of them well.”
But even more important, he says, “Hire the best people you can. Don’t be complacent about that.” In the end, “That will make you successful or not.”
Get the right financial leadership
Next, he says, “Make sure you have the right financial leadership. A lot of startups fly by the seat of their pants. You need to know your operating costs. I’ve always tried to find the best financial officer I could. If nothing else, have a financial advisor who can help you strategize where you are and the things you’ll need.”
Doing that can prevent you from “Hitting a brick wall when you find you didn’t plan for what you need on the development side.”
Finally, he adds, “Make sure you have a plan that can get funded. Great ideas go nowhere unless you have a plan to get there. Keep it simple. The more complex you make it, the harder it will be to get to where you want to be.”
In general, Jones says, “We’re in challenging times, but there are still a lot of opportunities out there.”
Brett Reizen launched his startup Entertainment Benefits Group (EBG) on September 12, 2001, a day after 9-11, so he learned the value of running a lean operation quickly in the economic turmoil that followed.
Today, EBG, which has 200 employees and 7,000 corporate clients, reaches 34 million people and is still growing. It provides travel and entertainment worldwide, reaching corporations and consumers through their corporate benefits program, TicketsAtWork.com, and several consumer sites: BestOfVegas.com, BestOfOrlando.com, BestOfNewYork.com.
Brett, 35, tells the TechJournal that he learned very quickly that he needed to stay on top of bills and the financial side of the business, but if he had one thing to do over, he would pay attention to that even earlier.
It’s challenging for a startup to hire professional help with accounting and financial planning, he notes, but says if you can’t do it yourself, you need to bring someone in from outside.
He also warns against buying an office condo or other unnecessary property. “Liquid cash is more important than anything,” he says. “Rent. It gives you a lot more flexibility if you grow more quickly than you expected to or if you have to downsize.”
He also says entrepreneurs need to “Stay focused. I still have a lot of ideas every day. Focus on areas you can expand with your resources and your business model. Don’t try to do everything at once.”
Here are his nine top cost-saving tips for startups:
1. Have good personal credit - Get credit cards, pay them off in full and keep asking for a higher credit line. I did this for the first 24 months and also earned membership rewards points. I soon paid for all travel expenses with the credit card rewards points.
2. Lower your living expenses – I was young and saved enough money to go about two years without making any money. I lived with my parents for six months to start the company and then had a roommate for three years. When working 12-15 hour days consistently with the ultimate goal of moving up, your confidence is high in knowing that with hard work, you will get there. Where you live and sleep doesn’t seem to matter much.
3. Find a good landlord - For a new company this is always the challenging part. Try to find a landlord willing to be flexible and supportive. You shouldn’t get too much space, but the trick is always the length of the lease and what to do if you grow fast and need more space. Always be a close friend with your landlord.
4. Rent and do not own. (unless you already do). Renting gives you more flexibility. Stay away from office condos.
5. Spend more on the company and less on you. Remember that when spending more on the company means less money for you short-term, but the long-term and bigger picture will make it all the more worthwhile later.
6. Review all bills. It can be surprising how many errors vendors make on all sorts of bills. Make sure you review your phone plans, electric, server expenses, photocopy details and almost every bill you get. The little numbers add up and a monthly reconciliation can save you thousands. We didn’t pay attention to this early on and when we woke up and started, we were pleasantly surprised.
7. Don’t underestimate the importance of good bookkeeping. The only way you truly know your bottom line is quality reporting. It is mind boggling in how many entrepreneurs focus on the gross sales and neglect all expenses and proper accounting. I also learned the hard way and learned through mistakes early on. Make sure to not cut any corners, pay the extra money to hire a professional or a strong person to evaluate your accounting and reconcile your finances every month.
8. Don’t by new equipment. No need to buy brand new furniture. Large companies move all of the time and in many cases they leave behind their furniture, often times great furniture, which looks brand new. Spending some extra time asking friends, family, associates and business colleagues can save you thousands, and in many cases if you find the right used furniture –it can look brand new. I never bought new furniture during the first 6 years we were in business.
9. Start when you’re young. You are used to spending less and have not yet developed expensive tastes. You need a healthy balance of having enough experience or mentors in your life to help with answers that you think you should know but don’t, but age is an important factor in starting a business. It’s much easier before marriage and kids come into the picture because if things don’t work out, you don’t have the stress and responsibility that you will have when you’re 35-45.
You can make connections with 50 high growth technology companies from the Southeast and Mid-Atlantic as they present to hundreds of executives from the region’s innovation, entrepreneurial and venture communities at the Southeast Venture Conference March 13-14th at the Ritz-Carlton Charlotte, North Carolina.
In addition to presenting companies and hours of executive networking – the conference will feature a speaker line up inlcuding SAP CEO Bill McDermott, dozens of leading venture capital investors from groups like Advanced Technology Ventures, Intel Capital and Edison Ventures; industry insiders like Forbes publisher Rich Karlgaard and policy makers such as North Carolina Governor Pat McCrory.
This year’s confirmed presenting company line-up includes:
The Southeast Venture Conference is headed to Charlotte, NC, in March 2013. The event offers firms a chance to present to top national venture capitalists and angel investors.
In addition to the showcase presenters and hours of networking – SEVC 2013 will feature current market relevant panel and presentation topics for investors and executive entrepreneurs. These events sell out, so register now if you plan on going.
While landing a round of venture financing can help drive a startup’s growth, the best venture firms bring more than money to the table when they make a deal.
Justin Reger, a principal at LLR Partners, a middle market private equity firm with more than $2 billion under management, says that the first step his firm takes following its investments – whether as a majority or minority investor – is set-up a strategic planning session.
Reger, who manages LLR’s technology practice and previously an investment banker with Citigroup focused on technology, about the added value investors provide their portfolio companies at the upcoming Southeast Venture Conference in Charlotte, NC, March 13-14.
First: strategic planning
“Soon after we close a deal,” says Reger, we hold a two-day offsite strategic planning session, first for one-year and then for three. We hire a moderator who knows the industry.”
LLR starts by sharing its due diligence findings with the company and its management team. “We put that on the table and build the strategic plan with the team. We don’t say what they could do. It’s more to create a framework. Then we build up operations and tactics to support the plan.”
LLR then revisits the plan with the company each year. Some have accomplished their goals, some have not. The plan is updated annually.
Second: augment management teams
Next, LLR looks at a company’s management team. “Often, teams are incomplete,” says Reger. “They may have a solid CEO, a CFO, and maybe a head of sales. They may not have a product or marketing manager. We don’t look to replace senior management, but rather to augment the bench from our network.”
That is often guided by the results found by an outside assessment firm hired during LLR’s due diligence process. “They identify key areas that need to be upgraded or augmented to drive value.”
Third: Getting to $100 Million
Next, LLR looks at the company’s finance function, where infrastructure is “typically lacking,” says Reger. “The typical company we invest in has a strong product in a well defined market, but has to breakthrough from $10 million to $15 million in revenue to $100 million.”
Fourth: M&A possibilities
Reger says LLR also sometimes “Serves as an outsource M&A arm for the company. We canvas the network of adjacent players and make calls, qualify opportunities, work with management to see if it’s a fit and help with integration.”
Many companies in which LLR invests also benefit from channel partner development, Reger notes. “There is an ecosystem of larger players, resellers, OEM sales channels and a portfolio company’s ultimate acquirer might be in that system. The IBMs, SAPs, and HPs of the world. We have pretty good contacts at those organizations.”
William McDonough, winner of two U.S. Presidential awards for environmental sustainability, is teaming with Cherokee to support environmental startups through the Cherokee-McDonough Challenge.
Based in North Carolina’s Research Triangle, the Challenge is designed to identify, fund and develop high impact environmental startups.
Now accepting applications, the Challenge is sponsored by Cherokee, an investment fund manager and globally recognized leader in environmentally sustainable business practices.
McDonough, co-author of Cradle to Cradle: Remaking the Way We Make Things (2002) and The Upcycle: Beyond Sustainability — Designing for Abundance (2013), will partner with an advisory committee of experienced entrepreneurs and investors to counsel the Challenge entrepreneurs.
Challenge will invest in five startups
“The Cherokee-McDonough Challenge is important because it encourages and empowers solutions to the massive environmental challenges that face our world,” says McDonough.
Now entering its third year, the Challenge will again invest in three to five high impact environmental startups.
Each venture will receive:
$20,000 in seed funding
free office space for three months in Raleigh, NC, (a focal point in the renowned Research Triangle)
complimentary back office support from Cherokee Investment Services, including help with incorporation, accounting and IRS compliance
hands-on mentoring from an advisory committee of experienced entrepreneurs and investors
an opportunity to present to other investors and the public
Cherokee-McDonough Challenge portfolio companies should finish the summer with a working prototype, a refined and vetted environmental strategy, a professional web presence, knowledge of intellectual property strategy and tactics, investor-ready fundraising documents, a stronger network of investors and mentors, a polished pitch and a runway towards a Series A capital raise.
Is it still possible to build a digital media company into a disruptive force that leads to a hugely successful IPO these days? Bob Hower, general partner at Advanced Technology Ventures, believes it is.
Hower was instrumental in Acme Packet’s 2006 IPO, one of the most successful in the communications sector this decade. Forbes named him to its Midas list the last two years. is ATV‘s East Coast lead partner for investments in information technology and is primarily focused on the internet, digital media and software sectors with an Enterprise focus.
“I don’t know that it’s harder or easier to launch a successful IPO now,” he tells the TechJournal. “But on the Enterprise side, there are all kinds of disruptive opportunities and trends going on. You need a really strong idea and a team that understands the market.”
Hower will join two-dozen other top venture capitalists and more than 50 innovative presenting companies at the upcoming Southeast Venture Conference in Charlotte, NC, March 13-14.
Going after problems businesses have takes exceptional people and ideas, Hower says, and winning in the end probably requires some first mover or other advantage in the beginning. “Every startup needs to look for that kind of thing,” he adds. “Technology advances that give them an advantage.”
Look for an advantage
Businesses, he notes, “Are looking at the cost structure of lots of things they have.” For instance, he says, “It used to be that moving your apps to the cloud was risky. Now it’s risky if you’re not thinking about it.”
Today, Hower says, startups have to move faster because “Information is moving faster than ever. You can be sure your competitors will be looking at you,” and given the chance, they’ll stomp on your new idea. So, he says, “You have to move faster and be more conscious of building a protectable business model and go-to-market strategy.”
Ash Ashutosh, CEO, actifio.
There are ways to get it done. Hower points to one of ATV’s portfolio companies, Actifio. “It’s in the digital storage space, which is hard, because people are careful with their storage. The CEO (Ash Ashutosh) is an incredibly customer-centric guy. He understands how difficult it is for people to manage their storage now. I’ve actually heard some of his customers say, ‘Now I can sleep at night.’ That’s the kind of emotional impact you need to have.”
Hower says that one of the things great entrepreneurs have is “A way of telling a story that is both credible and exciting. They emphasize the possibilities without being unrealistic.”
How do you get there?
The quality of an idea and the business narrative are related, he points out. “If you say you have a billion dollar market, you have to build some credible assumptions so people know how you are going to get there.”
Entrepreneurs can do research to show how companies that came before them achieved certain penetration rates, for instance.
What does Hower look for in an entrepreneur’s narrative when they’re seeking an investment?
Questions a VC asks
He says, “An early question I ask is ‘How many customers have you talked to? How much will they pay for this? Then you have a basis for how big the market can be.”
Beyond that, he says, “An entrepreneur has to understand not only his customers, but also the ecosystem they’re going to be in. Do they know anyone who can give them a leg up? Who can become a partner or a customer?”
He looks for entrepreneurs who “Are eager to learn and can do an accurate self-assessment of what they do and do not know.”
He also looks for optimism, “based in reality.” Running a startup is an up and down business. Some days you sign a major customer. The next day everyone you talk to says “No.”
“They have to be able to put with a lot of ambiguity and hard work. If you’re going to walk the long trail with this person (as an investor) you have to think he’s savvy enough to get there.”
Although a large majority of startups are hiring (87 percent), a similar number struggle to find people with the skills they need, according to Silicon Valley Bank’s fourth annual Startup Outlook study, a survey of startup companies nationwide.
Hightlights of the Startup Outlook survey:
• 87% are hiring
• 46% have at least one founder born outside the U.S.
• 82% say STEM skills are critical to their business
• 87% say it is somewhat or extremely challenging to find workers with the skills they need to grow their business
• 66% say the biggest challenge to retaining the talent they need is a combination of finding and competing for the people with the right skills
The report also includes several anecdotes from startup companies as well as the results of the survey related to finding and retaining talent.
“Every time I meet with a group of tech company CEOs they say the same thing: hiring world-class talent is one of their biggest challenges,” said Greg Becker,president and CEO of Silicon Valley Bank. “They struggle to find, attract and retain the engineering, scientific and technical talent they need to grow their businesses.”
Google down the street
That echoes many reports we’ve seen on the technology job space. People with the right skills are in high demand and attracting and keeping them is a problem for many startups, which have to compete for them with larger, established companies.
“As soon as good employees raise their heads, they’re snatched up,” Andrew Evans, CFO at Boulder startup Symplified. Its neighbors include Google, Oracle and Microsoft. “If you’ve got Google 10 blocks down the street,” he told SVB, “you have to be creative to differentiate your company on more than just salary.”
“We need to create a tech-savvy, highly skilled American workforce – the more people with skills that are in demand, the better for all of us. When it comes to immigration policy, we believe that Congress is well aware of the issues facing the technology industry, so the time to act is now.”
High growth small companies, while few in number, have an outsized impact on the U.S. economy. They consume roughly 0.1-0.2% of U.S. GDP in invested capital, but create roughly 11 percent of U.S. private sector employment and 21 percent of U.S. GDP – or roughly twelve million jobs and over $3 trillion in annual revenues.
“With this report, and the Startup Outlook survey at large, we are trying to bring facts to the table in the hope that better data will help lead to better policies for our country,” said Mary Dent, head of Silicon Valley Bank’s government relations group and General Counsel.
Silicon Valley Bank conducted its annual Startup Outlook survey in December 2012. More than 750 executives of startup companies, defined as those in the innovation sector with less than $100 million in annual revenue, responded.
The company will be releasing additional data and reports based on the survey in the coming months. View all news related to the results of the Startup Outlook survey at http://www.svb.com/startup-outlook-report/ and follow the conversation on Twitter at @SVB_Financial #StartupOutlook.
Brian Rich, managing director, co-founder, Catalyst Ventures.He’s participating in the Southeast Venture Conference in Charlotte, NC, March 13-14.
By Allan Maurer
What’s the best way to contact a potential investor in your startup company? Venture capitalists see so many business plans come through the door that the way you contact them is important, says Brian Rich, managing partner and co-founder of Catalyst Ventures.
Since the mid-1990s, New York-based Catalyst has invested in more than 50 portfolio companies and completed 100+ consolidating acquisitions. Prior to co-founding Catalyst, Rich founded and managed TD Capital, the entity that made Toronto Dominion Bank’s U.S.-based equity, mezzanine, and limited partnership investments from 1995 to 1999. As group head, he oversaw approximately 40 investments totaling more than $600 million.
Rich will join two-dozen other venture capitalists participating in the upcoming Southeast East Venture Conference March 13-14 at the Ritz Carlton in Charlotte, NC. The Seventh Annual SEVC includes presentations from more than 50 high growth technology companies from the region, and insights into fund-raising from industry experts, and many networking opportunities.
The best way to approach a venture capital firm, Rich says, “Is through a warm introduction. Email me referencing someone I know or trust. Things like LinkedIn make that easier. ‘Brian, I know so-and-so and he recommended that I write to you.’ That’s a warm introduction, and I’ll pay more attention to that.”
Before you approach any VC with a pitch, however, you should do your homework thoroughly, he adds. “We’re sort of like doctors in our business – very specialized,” he explains. “There are investors who are geographically focused, some who are stage (of fund raising) focused, and some industry focused.”
Those specializations break down even further to things such as early-stage healthcare, or social media and so on.
“You need to do your homework directly or through an intermediary because there is no point in talking to someone with no interest in what you do.”
Should you use an intermediary?
That brings up another question. Should you use an intermediary when fund-raising?
Bankers are not like consultants, he says. They don’t get paid for the time they spend on a deal, so they want bigger deals. If you’re only raising a million or two, Rich says, “I’d have to question whether or not you’re likely to be more successful with them or without them.”
If you do choose to go with an intermediary, however, Rich says you should make sure it’s with someone who has demonstrated that they raised money for other companies and can provide references. “Talk to four or five CEOs of companies they worked with,” he suggests, “and ask how they performed. Did they do what they said they would? Of the money raised, how much did they raise? Were you happy with the results?”
Once you make that decision, then decide on which VC you’ll approach – preferably with that warm introduction.
What sort of email should you send?
“Don’t send me a diatribe in email,” he warns. “I’m not going to read it. I get a hundred a day. Get to the point. This is my company, this is our size and scale, how much we intend to raise, the key merits of the deal and who you are. Keep it short enough to read in a minute or less.” Attach a one-page pdf with more details and if the deal interests the VC, it will get read.
It is essentially a written version of the elevator speech an entrepreneur should be able to deliver between floors.
Once you get into see a VC, “Don’t be too rigid in your presentation,” says Rich. “Allow the investor to ask questions. If you’re in the right place, he’ll have a good knowledge of the space you’re in. If the questions take you off track, you should be strong enough to pull the meeting back on track.”
If you don’t get funding and you come back to the same venture firm in a couple of years time, “Rest assured we will pull out your old set of projections. We save everything,” says Rich. “So be careful of what you say you’re going to do.”
If you’re lucky enough to interest a couple of investors, he says, “Don’t dilly-dally. Close with one of them. Go and get it done.”