Upstream Engineering Ltd. got their seed funding just lately. They claim to have the first battery operating color video projector possibly by the size of a matchbox. This sounds like a big thing but the prototypes are still to be seen. Here's their press release.
If you think that a 'double dip' refers to dining and you are raising funds you better read Feld Thoughts excellent post on the matter. 'A VC' comments the participating preference from the VC side. And since double dip is an issue to negotiate liquidation preference is usually something you barely can remove from the agenda. And Only Once comments of both of the terms and gets my support by sheding light to the entrepreneurial side as well.
Portfolio valuation is an interesting piece of art in the VC circles. Some of the funds are public and they have to disclose their positions openly. Most of the funds are private and are more than secretive about their returns and valuations. Writing down your valuation of a target company gives a certain signal to your investors but your collegues can read between the lines as well if your valuation level is way above the realistic level. At least it should signal something about your relative position vis-a-vis your investors or about your overall performance. Or maybe you're just a gambler and waiting for the lady luck. My opinion is that window dressing will get you only so far. Eventually the truth will come about and usually time will not make up the errors. Just look up the Shell reserve problem which was already known in 1998 and finally resulted the company CEO to resign earlier this year.
EVCA offers a free valuation guide (pdf) for those interested in the topic.
Loïc Le Meur has a great post about creating a company. As part of the series he discusses the differences between European and US entrepreneurship.
Just came back from an open sea sailing race. Must say that one always promises never to do it again after the race. It's one of those love and hate things. Usually conditions are harsh and the crew is totally wasted at the end. Still it does not take many days one is planning the next journey already.
It's the same with business ventures. One realises the hardship in advance but still it is a must to do another business journey when the right opportunity is at sight. The rough ride gives the required dynamic for life. After a long journey in primitive living conditions one starts to appreciate simple things like sitting in a coffee shop and getting served. Or after a successful IPO doing a round-the-world trip for three years.
It's all over the news today - Google dropped its target price. Burnham's Beat probes a bit deeper.
Is Google a bargain? I have hard time believing that their life will continue to be as high flying growth as it has been for the recent years. Competitors are catching up and Microsoft has caught their eyes on Google as well. How do you continously overperfom the investor expectations which are already discounting all imaginable future growth prospects in the search business? Basically that's the reason why every stock will eventually fail from the Wall Street perspective. No matter how profitable is your business - in the future you have to overperform yourself. Nokia was a good case in point before the major stumble. The stock price dropped heavily after announcement of quartal results which were as they had indicated but less than the analysts had expected them to top the company's previous estimates.
Predicting your business is always tricky. Especially in cases where you have not yet started. A young industry with less than 10 years of overall history and high speed in technology development makes life no more easier. Still the VC guys want to get the full picture. They need a sense of security for things that will materialise in 3 to 5 years.
In one of my cases I'm seeking a seed financing for a startup. We have done the 5 year P&L and cash flow forecasts. Everything is cool expect that the final years include also licensing income. One of our potential investors who is not an expert in this particular field dropped me a mail the other day. He likes to know my future licensing partners (their names), the deal structures, prices, licensing policies and specific conditions and terms.
I was not so surprised by the question but more concerned of the issue itself. Is it realistic to ask for such details in the ground zero phase? I'm sure we have a lot of material and rough idea of these details after running the business for the first year and meeting with potential clients and industry partners. Would it help the VC to make a positive investment decision if I gave him the names and deal structures right now? Seriously, who can say with straight face where they will be in few years down the road and doing business with? Paralysis by analysis...
And for those readers who need something to get started with the forecasting and valuing your venture, Nesheim has some free pieces of advice.
And for the valuation algebra there is an excellent post by Feld Thoughts.
Something is happening around the virtual keyboard innovation. Recently my site has been getting a load of hits from seach engines to my old post about the technology. I did not find anything especially in Google except a lawsuit or so. Anyhow, this just proves how the search engine guys can really feel the pulse just by looking at the queries...
Some good advice on starting a company by Feld Thoughts. It always takes more time than you expect, all your money and most of your patience as well. It's never easy and by doing it a few times you just get to realise the work load and pain more easily. Still it's a stretch - every time. But after founding a few I would not change a thing and definetely will found a few more in the future...The trick is to surround yourself with clever people. One cannot do it alone.
If you don't have the free cash flow to grow you business then you better make sure your term sheet negotiations are going the right way.
Here's a way to get your logo and web-site made cheap (via Deep Green Crystals) .
Jack Welch was once asked if he could do something differently what would it be. He replied that the hard decisions he would have done earlier and not waited as long as he did.
Do it earlier. I have learned it the hard way and I'm still in the learning curve. So what could be done earlier?
- selling your new product
- promoting your new venture
- starting your financial round
- penetrating new markets
- preparing for the strategic stretch
You don't need a ready product to approach your clients. Actually the earliest point I have been making a tour with potential customers was when I did have nothing but an idea. No business card or any reputation in that particular business field. But still the tour was worthwhile. People were helpful and I got confirmation of my business idea and great leads.
Being more willing. That's hard. Especially with hard decisions - cutting costs and loses. Still I prefer to do things almost too early than to figure out later that window of opportunity was missed due to slow decision-making. Right or wrong but just do it.
The other day I had a discussion with a well-known figure in the VC industry. He entered the VC scene some time ago with the biggest first timer fund ever in the market. Now he's putting together next fund which indicates a successful management of the first one. Not an easy job considered that the last years have been very hard for almost all high tech sectors and especially for ICT and telcom. In dot bomb times 100m was not a big fund or money at all. Now bn size funds are scaling down and it's difficult to find good returns for all the allocated money. Time value of money seems somehow reversed in the VC circles.
No doubt Google IPO is the high tech event of 2004. However I heard today that South Korea has had many high tech IPOs in the last years. The valuations are lower than in US but still. Haven't seen much IPO activity in Europe or US anyhow. Maybe some of my readers have a better insight for the South Korean market?
Usually investors are the ones who carry out the due diligence for the potential target company. It's not rare that an entrepreneur do not impose any questions for the investor. This is a clear mistake. Even though you might not have that much choice you still should be very careful and evaluate the potential investor(s). If nothing else you're showing active interest for the VC and weighting their competence and match for your case. Should not harm the negotiation situation...
Private equity injection is like a marriage. You're bound together for the good and bad times until the exit will set you apart (usually in 3-5 years). Here's a short list of items one should consider when evaluting the VCs candidates:
- fund focus (their expertise in the field)
- current target companies (any competitors / conflicts of interest)
- fund life cycle and conditions
- fund's investors and their backgrounds
- investment terms and size (follow up investments as well)
- type of investor (financial, 'smart money' and how)
- personal & fund history and references & success stories
- decision-making and management style (fast / slow, passive & participative, authorative etc.)
- motives and interest (why they want to make the investment)
- personal chemistry
- network (resources, clients, VCs, people etc.)
Those were just some examples. A seasoned entrepreneur might consider other factors as well. Who would be the most beneficial investor for my purposes (next rounds, board seats, influence power etc.) and hidden agenda...
Recently I have been asked to help fresh entrepreneurs in their voyage for a successful growth company creation. Some of these guys have been in the business world over 20 years in high corporate ranks but never in the startup environment. It's a totally different world when you don't have a secratary that has booked your schedule full for the next twelve months. This freedom drives some people full of energy and action but scares the other ones. No predictability, so many details and issues one has to take care oneself without any assistance or prior experience.
Anyhow, here's my favourite advice for all entrepreneurs already in the route or just about to get started. Read these two books and remember that only the paranoid will survive:
1) Nesheim: "High Tech Start Up"
2) Ferguson: " High Stakes, No Prisoners"
3) for those with need for an advance level course: Sun Tzu: "Art of War".
Nesheim is an excellent guidebook from the start till to the IPO stage. It's a handbook with valuable comments and points. Very practical and easy to read. Ferguson is a subjective story of a successful entrepreneur who made his mark in the boom times of 90's. However this book gives more flavour and spice for the clinical approach of Nesheim. Ferguson is very straight talking and paranoid with his venture - but for a reason. He sold his company to Microsoft and went through many stages of hardship and VC money before landing to the exit stage.
Mårten Mickos writes about software patents and how they are anti-business and anti-innovation. This is especially true for small companies who do not have afford to build a huge patent portfolio in order to prevent possible infringement claims from the big guys.
EU is now in the process of changing its legislation regarding software patents. Open-source movement among others have heavily objected for the changed that are lobbied by large companies such as Nokia.
When is a VC round easy to accomplish? My guess is that when one do not need one (same applies to bank loan - in general).
I've been in a seed finance round for a while now. The case seems to be OK from all the aspects. However either the funds required or the applicable business area are creating the complications. Today it's difficult to find a competent seed round institutional VC. The ones who are still around are focused more on the early stage and do not really bother to invest anything less than €4m. That's understandable if the VC fund is €100m or more. The partner time just cannot be fragmented to dozens of small companies.
However from our perspective this does not make things any more easier. The seed financing companies that are still alive are either focused on something very traditional like software or mobile which is more than over-crowded and -invested or they are just pure opportunistic players who do not take leads and invest only for syndicate cases. From the list I have scaled out those guys who do traditional industries outside of high tech since one cannot expect to fit to their world without losing all the aspirations of an international growth company.
I bet I'm not the only one with the gap. A seed of 0,4-1m€ should not be that uncommon. However this amount of money is a bit out of range from pure private angels in Europe (maybe except Switzerland or so). Still, it's unattractive for early stage guys. Friends and families are hard to find with that thick pile of cash especially in countries where private pension contributions are carried out by state in form of taxation leaving no cushion for private individual's investements.
It's has been a while since the last posting. I was caught up by tons of work with two companies and almost full time of studying on top of everything in the spring. Now the holidays are over and I'm ready to rock again.
I was not the only one slowing the pace with blogging. Last spring lots of biz blogs were getting only a few posts if any. I suppose blogging is a substitute for working and therefore a direct indication of either one's motivation / work load?
A few weeks back I read Richard A Clarke's "Against All Enemies: Inside America's War on Terror". Must say that it was illustrative of the US government ways of working and most of all about politics. West Wing gives too nice of a picture of the behind the scenes actions - at least in the current Bush era. If you have the chance glance the book through.
Last weekend I went to my friend's wedding and the guy next to me in the dinner table was an independent consultant. He had been working with Nokia in the past years. He has been wondering whether to buy Nokia shares or not. They seems to be cheap now but still the most important question for him was that does Nokia has the cuts to come back? He was involved with building a new worldwide logistics system for the company and was more than aware of the quality problems with the handsets. My only advice was that usually Finns are really putting their act together in the time of crisis. The famous 'sisu' steps in to picture and make miracles to happen.
However, I'm still waiting to get my new Samsung handset with Palm OS and more than happy to abandon my ten years history of Nokia phones...