Startable

Just a quick blurb on an Atlas portfolio company, Lilliputian. Lilliputian is creating a micro-fuel cell capable of powering mobile devices substantially longer than traditional batteries. Massachusetts Governor Deval Patrick was on hand yesterday to celebrate Lilliputian’s expansion plans. Massachuesetts state government seems to be really committed to turning the area into a real player in the clean energy industry. The region has the technology talent and investors to make it happen, and it is nice to see the state supporting this effort in a substantial way.

Julien Wallen, CFO at a startup called pearltrees, has pulled together some interesting data on VCs who fund internet startups. He used Crunchbase as his source, so the data isn’t perfect, but there are some pretty interesting data points. While this data isn’t a perfect source for info on venture capital equity investments, there are some very cool tidbits in it.

There is no surprise that Venrock, GC and Spark are the Boston players near the top of the list. 

Pre-money valuation (average) go from $5 to $22 to $45 (millions) for the A, B and C rounds, respectively.

Note that this is from Crunchbase, and so the data isn’t perfect. In fact, my fund, Atlas, would rank much more highly if some of our companies were included, such as Songbird, Zoopla, OwnerIQ, Moo, etc. Some of this is because Crunchbase has a strong US bias, some is because not all of our companies are in Crunchbase or are not properly categorized in Crunchbase, etc. 

However, I hope that Julien continues to update this list, as it is quite interesting.

Continuing with my theme of quick tips for the startup entrepreneur pitching his/her startup to venture capitalists, I’d like to offer this relatively worthless tidbit:

VC Pitch Tip #2 - You won’t be eating much lunch during that “lunch” meeting

A lunch meeting with a VC isn’t really a lunch meeting for you, because you’ll be the one talking. Remember, you are meeting the venture capitalist to pitch your business. That means you’ll be presenting and answering questions while the VCs stuff food down their throats. There will be food available for you to eat, but there will not be time for you to eat it. If you have low blood sugar or get distracted when hungry I’d suggest you grab a bite to eat before your lunch meeting with the VC. 

VCs don’t schedule these meetings to torture entrepreneurs, but sometimes it feels like that is the case, with the entrepreneurs staring forlornly at their plates while frantically working their way through the PowerPoint slides… the only chance to grab a quick bite when a self-important VC launches into a long-winded diatribe about the importance of technology differentiation and something about a “China Strategy.”

The other tip related to this one is that you probably want to pick the food that is the easiest to chew. You never know when that VC will finish up the useless “China Strategy” point and leave you with just a second to chew, swallow, clear your throat and come up with some sort of competent sounding response to the asinine question. 

(The intent of these tips is to help the entrepreneur with little things that can be done to make the actually meeting with a venture capitalist go a bit smoother. None of these tips will directly cause you to raise capital, but may make the actual pitch go more smoothly.)

I’ve decided to post some really basic tips on presenting your startup business plan to venture capitalists. The intent of these tips is to help the entrepreneur with little things that can be done to make the actually meeting with a venture capitalist go a bit smoother. None of these tips will directly cause you to raise capital, but may make the actual pitch go more smoothly.

Pitching a VC your company is quite stressful. I hope that these silly little tips can help you relax and decrease distractions, so you can focus explaining your business and selling your team.

VC Pitch Tip #1 - Turn off your screen saver.

Many times during a presentation by a startup CEO we get into a lengthy discussion. During these discussions the startup executive’s computer (the computer that they are using to project their slide deck for us) can kick on. I’ve seen CEOs horribly distracted by their screen savers turning on, even when we were not looking at the slide/screen at all. I don’t mind when the screen saver flicks on, and I’d imagine that most VCs don’t care either, but if this sort of a thing distracts you then turn off the screen saver before your pitch. 

If you are trying to raise early stage venture capital and are actively engaged with a VC or two, you may have noticed a funny variance in the VCs level of interest, excitement and mood. This is completely normal! As a startup’s dialog with a VC matures the VC will go through a totally natural “Deal Hype Cycle.” I’ve diagrammed the important stages in this venture capital deal hype cycle below and included some tips on how you can recognize these stages in your potential funding partner - and what you can do to help keep the process moving along. As a startup CEO, you don’t have to be a passive participant on this roller coaster… you can positively influence the VC and keep your fund raise on track! Note also that this is the cycle for an investment that actually closes.* (You may also be interested in my previous post on the VC deal process.)

Stage 1: The Pitch

Hype Level: Pretty Good

If the VC took the meeting with you they must be at least decently interested. Most business plans introduced to venture capital firms never make it to this stage (i.e. are never met with), so your startup probably has something going for it.

What you can do: Read the rest of this entry »

This morning Amazon announced the finalists in their Startup Challenge - Prasad and the team over at Pixily are finalists! Congratulations to the entire Pixily team! For those of you who don’t know, this is a competition where Amazon is searching for the “hottest” startup using Amazon’s Web Services to build its infrastructure and business. If the Pixily team wins they will walk away with $100,000 in cash and AWS credits!

I believe that the finalist will be picked on 11/20 at Amazon’s head quarters in Seattle, so godo luck to Pixily!

In how to choose the right business idea, I introduced the concept of the Idea Funnel.  Like me, you could use the idea funnel to narrow down a bunch of startup business ideas into few viable ones. I talked about stage 1 of the due diligence process, namely, “Is the idea viable?”. In this post, I will present the second and final stage, namely, “Can I execute on it?”. 

Stage 2: Can I execute on the business idea?

In stage 2, you are focused on things that you need to successfully take your business idea to the market. Here are the few things you need to have:

Read the rest of this entry »

Last week, I gave a talk on “Starting a Business upon Graduation”  to a group of Harvard Business School students. In addition to sharing my experiences in starting Pixily right after graduating from Wharton, I shared my approach on how one should zero in on a viable business idea. 

I approach the idea development process similar to how one approaches sales leads within a sales funnel (see below). I start of with a number of rough business ideas and put each idea through the due diligence funnel. Some make it through the funnel and some don’t. Ideas that make it through the funnel are more viable and have a higher chance of being successful.

Read the rest of this entry »

Is the US ecommerce market nearing its long term penetration rate, as a percentage of total retail sales? ComScore recently released data indicating that ecommerce retail sales in the US grew by only 6% in Q3 2008, a meaningful dip from the growth rates seen earlier in the year and much lower than previous years’ growth. Additionally, Q2 data from the US Census seems to show that retail ecommerce in the US has flattened out at about 4% of the US retail sales total. (next graph is from the US Census pdf linked above.) 

Some additional figures you might find scary (ComScore is source, again) Q3 2007 Year over Year online retail sales growth was 21%, vs the 6% Q3 quarter 2008.

Are we nearing a peak? Read the rest of this entry »

Yesterday MSFT announced their new cloud computing service, “Windows Azure.” I’m not going to get into detail here on it because it has clearly been beaten to death by much more talented writers, and I’m also a day 

late to the party. However, given the recurring theme on this blog about cloud computing I feel the need to comment. I believe that the Microsoft cloud computing heralds the enterprise’s acceptance of the cloud - and that is big.

My prediction is that enterprises will dip their toes into the cloud by taking advantage of the cloud’s compute power, putting computationally intensive crunching into the cloud first. Likely this will be non-core or lower sensitive data in a non-mission critical process. As SLAs are better understood and security is, well more secure, other things like backup and redundancy will likely scoot towards the cloud. Eventually we’ll get full blown enterprise applications in the cloud. 

Here is a good post on the MSFT cloud effort if you want to learn more.