David B. Lerner

Dave Lerner, 3x Entrepreneur, Angel Investor, Host of Venture Studio
I’m a Serial Entrepreneur, Director of Columbia University Venture Lab/Spin-Offs Program, Angel Investor, and Golfer-in-Exile.

26 posts categorized "Technology"

Turning Social Data Into Real Life Connections

Social media has made the world smaller — thanks to sites like Facebook, we’re all a couple degrees closer to each other. But are those new connections extending beyond the virtual space? An ambitious mobile app called Sonar aims to use the vast amounts of social data we’ve put on the web to connect people offline through location, mutual friends or mutual interests.


Check out our interview with Sonar founder Brett Martin to learn how he wants to democratize the meeting space, the perks he offers to entice new hires, some of the challenges he faces as an entrepreneur and how growing up in the popular vacation community of Ocean City, MD and making friends with complete strangers inspired him to pursue the creation of an app that helps you realize your online connections in the “real world.” 

Click on the picture to see the whole video at Venture Studio! 

 

Brett Martin TypePad 

Partnering with “Friends” in Your Startup: Good or Bad Idea?

20080121-young-bill-gates

This is part of my Series on Entrepreneurial Culture.

Lots of people worry about partnering with friends when they launch a startup. This is mostly because there’s an old saw out there, deeply ingrained in our collective consciousness about how the best way to ruin a friendship is to get a friend involved with anything having to do with money, business and the like. I’ve heard this meme repeated ad nauseam throughout the years in the form of “advice”, mostly from non-entrepreneurs, parents, grandparents and others who have never actually been involved in business. I actually think this should take its place among the annals of the most commonly dispensed worst pieces of advice given to entrepreneurs. In my view it’s just a gross generalization based on some seriously flawed views about business and friendship alike. 

Obviously if you are thinking about partnering with anyone, let alone a friend, it should be because you believe that person will add a great deal to the business you intend to build. (See my post on this subject here). You should never partner with someone for the sole reason that you trust them and feel comfortable around them. Nevertheless, if you are considering partnering with someone who will bring enormous value to the new venture who also happens to be a great friend of yours, you are actually incredibly fortunate. Now you won’t have to spend any time worrying about your partner's character, capacities or loyalties and you both can focus 100% on building a thriving enterprise. To boot you'll have a trusted friend in the same foxhole as you embark on one of the most challenging aspects of human endeavor- a startup company.

There’s a slight catch, though. One thing you’ll absolutely have to do before making such a momentous partnering decision is to ask yourself whether this person is really a true friend of yours. As we all know, the word “friend” is a catch-all and can mean almost anything, as in "My good friend, the Congressman from the great State of ....". You get the picture I'm sure.

So let me replace the old saw above with a better one: “Know who your friends are”.  If it’s someone you’ve relied on for years through thick and thin, someone who’s loyal, unselfish, fair-minded and puts your interests right up there with his or her own- you are talking about a friend. If it’s someone you started following on twitter last month who tweets about the same cheeseburger you like at Shake Shack- it might be time to take stock of things.

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Cultivating a University’s Entrepreneurial Ecosystem: A Master Class with Ed Roberts

MIT DOME at night MIT DOME

This is part of my Series on University Entrepreneurship.

 Last week the National Council for Entrepreneurial Tech Transfer hosted a fantastic webinar in which MIT Professor Ed Roberts held forth and responded to questions with contagious enthusiasm for over ninety minutes addressing the origins and evolution of the formidable entrepreneurial ecosystem at MIT. He is certainly uniquely qualified to do so having been a student who earned four degrees from MIT including a PhD in Economics, a business school professor, a serial entrepreneur, angel investor, venture capitalist, CEO, Chair of the MIT Entrepreneurship Center and Chair for 30 years of the MIT Sloan’s Management of Technological Innovation and Entrepreneurship Group. He is also the co-founder of the MIT Management of Technology Program and is the author of eleven books and 170 articles on the subject of entrepreneurship and technology.

He has also recently conducted a landmark study entitled, "Entrepreneurial Impact: The Role of MIT" which demonstrates that “if the active companies founded by MIT graduates formed an independent nation, their revenues would make that nation at least the 17th largest economy in the world.” From this study we learn that MIT alums have founded in excess of 25,000 active companies that have generated sales of $2 trillion worldwide and employed 3.3 million people. As I have stated in previous posts, American universities are an absolutely profound engine of transformative innovation for the US and world economies. Studies and statistics like those put forth by Dr. Roberts make an emphatic case for the immensely positive economic impact of university entrepreneurship.

In the webinar Professor Roberts shares his experience and insights into the importance of understanding a university’s underlying culture and the need for institutional leadership on the issue of advancing entrepreneurship. He shares his experiences with various types of alumni initiatives, with the establishment of a comprehensive entrepreneurship curriculum, his opinions on the proper approach of the university’s tech transfer office, and the role that student groups as well as university institutions play in the process. He also stresses that there is no single formula- one must always adapt to the particular environment and setting of one's own university.

As someone who operates the university venture lab at Columbia University it was terrific for me to compare notes and get a sense of the big picture from someone who has been engaged in cultivating university entrepreneurship for nearly a half century. As always I welcome your thoughts and comments.

 

For Part Eleven in this Series, click here

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Raising Capital and Launching Startups in Uncertain Times

Begging

This is part of my Series on Venture Capital.

A few weeks ago I authored a post describing five common myths about raising capital. In this webinar organized by the National Council for Entrepreneurial Tech Transfer, I am joined by colleagues of mine from the venture, angel and legal community to specifically address the challenges of raising capital and launching new companies in a difficult economic environment. The webinar's agenda also includes the following specific sub-topics:

  • How recent market developments are affecting tech transfer offices and startups.
  • Emerging trends in the angel investment market.
  • Emerging trends in the venture investment market.
  • Changes in legal terms of startup transactions.
  • Positioning startups for funding and operational success.

In my remarks I specifically address how the economic downturn has affected university start-ups/spin-offs and what steps university venture labs can take in light of such conditions.  I welcome your insights as always.

Jeff Bezos: Extraordinary Entrepreneur

This is part of my Series on Entrepreneurial Culture.

If you’d like to hear an amazing entrepreneur talk about what he’s learned about over the past fifteen years, definitely listen to Jeff Bezos in this video below.  You’ll also hear why he’s so excited about his recent acquisition of Zappos. For those who don’t have time to watch it in its entirety his major points were:

  • Be relentlessly focused on your customers
  • Be ready to invent on behalf of your customers
  • Be ready to think long term and ignore the noise
  • Zappos is a remarkable company and is obsessed with its customers
  • Remember, it’s always Day One!!
     

It’s easy to look at the behemoth that Amazon has become today and forget that all of this started with a tiny team working out of Jeff’s house. He is a true visionary.

Raising Capital: How Would You Pitch Your Business to an Old Friend?

Old friends in old room

This is part of my Series' on Angel Investing and Venture Capital.

I came across this short post from London-based VC Nic Brisbourne yesterday and it immediately struck a chord with me.  Essentially he recommends that entrepreneurs pitching to investors should communicate as if they were pitching to their best friend. In my opinion this is a simple yet very effective prescription and encapsulates in one fell swoop all the right things one should do in a pitch.

Remember, investors are first and foremost looking to back great entrepreneurs who know how to communicate well with colleagues, employees and customers.  When you convey your ideas in a straightforward and unaffected manner, are responsive to feedback, and as Nic says, “do as much listening as talking”, you’re really putting your best foot forward.  

Would love to hear your thoughts on this.

For the next post in this Series, click here.

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Notable Posts: "Read All About It"

Newspaper_boy 

London VC, "Does Operational Experience Help a VC?"

In VC deals, Price Doesn't Matter - But The "Promote" Does

WSJ on Andreesen

Don’t Raise Money: China StartupBlog

University Spinoffs: Bridging the Cultural Divide

Yalta

This is part of my Series on University Entrepreneurship.

 A big factor in having success spinning-out university startups is the ability to bridge the cultural gap between academia and the investment community.  I think about this divide a great deal, both as a long-time investor in this space and perhaps even moreso now that I am the director of a prominent university venture lab which spins out 10-12 new companies a year.

I was therefore delighted to recently come across this short post written by Amit Monga, Professor of Finance at the University of Alberta. He shares some excellent insights into the practice of investing in university startups courtesy of his prior experience as a venture capitalist.  Dr. Monga’s central premise is that investors want to see much more than technology when they speak with a university tech transfer office.  They are, after all, in the business of launching new companies, which require quite a bit more to succeed than the initial invention or discovery.

What really caught my eye, however, is his very first point which addresses the cultural divide to which I refer above. He points out that whereas it’s very much the custom in academia to focus on a professor’s achievements in research, (including his or her credentials, awards, honors, the number of grad students in their lab, etc.), the reality is that investors first want to hear a value proposition articulated for a potential business. Monga asserts that investors must actually have the answer to this question within the first five minutes of a pitch.

Having politely sat through quite a number of such lengthy introductions that never quite arrive at describing the “pain in the market”, I must wholeheartedly agree with Dr. Monga. In fact, I would say that this value proposition should be expressed within the first two minutes of a pitch.  If the investor is interested, there will be plenty of time to learn more about the professor’s academic achievements. 

 

I’ll go a step further on the subject of the cultural divide and say that I’ve seen instances where an investor’s motives are viewed extremely dimly by the academic. This too can be a problem.  Again, in this instance, it’s incumbent on the tech transfer folks to invite only the most reputable people into the university and to help work through any ingrained biases that might exist on either side.  For an eventual start-up to be successful, both parties will have to get along extremely well and will come to rely on each other. Start-ups are the very opposite of “arms-length” transactions.

So whether you’re an angel investor, a VC, an entrepreneur, a grad student, a post-doc or a university professor, it’s always valuable to approach university spin-offs with a great deal of cultural sensitivity and understanding.  I assure you, this sort of awareness alone can make all the difference.

 

For Part Ten in this Series, click here

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My Interview on Venture Hype

This is part of my Series on Angel Investing.

A few weeks ago I was interviewed by the great team at Venture Hype, a popular web-portal dealing with all aspects of angel investing. The interview was posted earlier today and can be found here. We begin by discussing my background and how I became immersed in the world of entrepreneurship and early-stage investing. We then go on to cover various aspects of academic entrepreneurship and university spin-offs, what works and what doesn't work, and what investing in this space is all about. Lastly, we touch on angel investing more generally. As always, I welcome your input and questions.

 For the next post in this Series, click here.

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Launching Your Company: Send Lawyers, Guns and Money? Or Do It Yourself!

Good lawyer bad lawyer

This is part of my Series on Entrepreneurial Culture.

The classic Warren Zevon refrain, “Send Lawyers, Guns and Money”,  could very well epitomize the attitude many first-time entrepreneurs take on when launching their companies.  In fact, I’m asked the question, “Which lawyer should I hire?” so often that I decided to share my quick thoughts on this matter.

In my opinion you actually do not need a lawyer. What you really need is a successful serial entrepreneur to be your mentor. She or he can help you not only with incorporation but with all the other issues you’ll be facing as you launch the new company.

In a nutshell- hold your fire and save your money.

Nowadays it’s a breeze to incorporate online and there are services such as Legal Zoom and others that remove any need whatsoever for engaging counsel.  Furthermore, standard Operating Agreements are widely available and figuring out whether to start an LLC, an S Corp or a C Corp or what state is best suited for your newco basically involves a two minute conversation with your mentor.  To pay a lawyer a handsome retainer and hourly fees to help you with any of these issues is a complete waste of money in my opinion.

If you don’t have an experienced mentor to help you and absolutely insist on hiring a lawyer, please remember that these services are a commodity. You should only work with reputable, respected lawyers that primarily work with start-up companies and who are well-regarded in your local entrepreneurial and investment community. If you go elsewhere you will most likely be shelling out thousands of dollars for the usual rigmarole.  Reputable counsel will help you set things up inexpensively and will be a resource that is available to you as you grow your company.  Their value will manifest itself once you actually have a revenue-generating business and are perhaps raising your first round of institutional funding. 

I of course welcome you to share your thoughts and experiences on this topic.


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Google Translate is Awesome

I recently found out that some folks in Asia have been using Google Translate to read my blog in their language. What a remarkable tool this is. Seeing a screen shot like the one below which translates my blog post on the five myths of raising capital into what seems like Japanese is also quite humbling.

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Driving the Golf Ball: Is Bubba Watson Human?

Bubba driving... very cool

This is part of my Series on Golfing-in-Exile.

I hit the driving range last weekend with my father-in-law.  We didn’t have our clubs with us and so each of us borrowed a driver from the clubhouse. Normally they give you broken-down clubs that are on their last legs. Not this time. These two drivers they gave us were probably as good or better than the ones we normally use.

After warming up some, we started hitting some drives, pausing intermittently to joke around and talk. We actually had a great time. The guy is amazing. He hardly plays, is sixty-eight years old and just gets up there and starts crushing drives smack down the middle every time like he does it every day. He is a true natural athlete.

Anyway, after a half an hour or so I started experimenting with different swings. I was imitating Kenny Perry’s swing, and started hitting a nice draw out there. Then I tried some upright power-fades channeling some Nicklaus videos I had studied when I was a kid. For the heck of it, I then started channeling Bubba Watson and went for some serious extension away from the ball and through the ball. (Bubba is the longest driver on the PGA Tour). The results were stunning. I started flying the ball 20+ yards further than any previous iteration of my swing. I went on YouTube this evening to study Bubba’s swing and now I see why. His swing arc is ridiculous. See this super slow-mo version below and tell me if what he is doing seems  humanly possible?

For Part 7 of this Series, click here.

 

 

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Old School Angel Investing: Joseph Conrad Revisited

Conrad in hat Conrad

“It is not the clear-sighted who rule the world. Great achievements are accomplished in a blessed, warm fog.” -Conrad

This is part of my Series on Angel Investing.

For many years I was a subscriber to Conradiana, a tri-annual journal of all things related to the life and works of the venerable Joseph Conrad. It’s a terrific scholarly publication and I’ve recently made a note to myself to sign-up so as to start receiving it again. During this time I sometimes toyed with the idea of buckling down and submitting an article with my supposedly original insights into the much analyzed short work, the Secret Sharer. Having no university affiliation or professorship to bolster my credentials, however, I would have had to submit as a so-called “independent scholar”- a bit of a stretch to say the least. Recently though, upon reading two separate Conrad biographies by John Stape and Jeffrey Meyers respectively, I realized that perhaps I could presume to submit a work to Conradiana after all, and one on a topic where few professors could boast of similar expertise. The submission I have in mind would bear this simple title: Joseph Conrad as Angel Investor and Entrepreneur.  As off-topic as this might come across, keep in mind that Conradiana editors have in the past published a title such as:  Colonial Encounters and Cultural Contests: Confrontation of Orientalist and Occidentalist Discourses in “Karain: A Memory”.  Or how about this beauty: The Power of Suggestion: Conrad, Professor Grasset, and French Medical Occultism.  In fact, maybe I’ll do myself one better and petition the Kauffman Foundation to provide me with a generous grant to do a field study on the subject for twelve months so as to extrapolate what modern investors can learn from Conrad’s track record of international investment in a pre-IPO world?  I’m sure they’ve funded worse boondoggles than this, no? (Well, maybe not).

Well, even if Conradiana and Kauffman should roundly reject my overtures, one thing is clear: Joseph Conrad was certainly a 19th century version of the modern angel investor and sometime entrepreneur.  And true to his romantic nature, he was willing to get involved with the most daring ventures with his meager earnings- always with an eye for out-sized returns so as to liberate him from the indignities of life at sea and subsequently, those of having to eke out a living at his writing table.  

According to Myers, Conrad’s various ventures included, “…. a whaling venture, piloting in the Suez Canal, Australian pearl fisheries, the Japanese navy, Canadian railroads, business in Newfoundland….”

From Stapes I learned that he actually started quite early in life and was involved in some illicit gun-running operations during his time as a young seaman in Marseille. Later, between stints on the Loch Etive and the Palestine in 1881, he and a former Captain of his hatched some sort of business together. Upon moving to London he bought an equity stake in the German shipping agent firm, Barr, Moering, and did some work for them out of their London offices from time to time. Then there was the South African gold mine debacle in 1895, an investment which allegedly failed only due to a shipwreck off the coast of Brittany which took the life of the entrepreneur Conrad had backed.  Some six months before this and soon after the release of his first published work, Almayer’s Folly, another venture he funded failed, though exactly what type of investment it was remains a mystery, only obliquely referred to by him in a letter to Poradowska, a Polish cousin of his.

I believe that there is much in Conrad’s work and remarkable life story from which we entrepreneurs and investors can draw inspiration. He was from Poland and his original name was Jozef Teodor Konrad Korzeniowsky. He became perhaps the greatest artist ever to write a novel- and this in his third language. His writing too, was completely unique, positively foreign in its rhythms and structure. And this too struck me- that one of the greatest “English” writers did not start writing until he was approximately 40, heard English spoken for the first time on ships when he was 21 and spoke the language with a thick, sometimes indecipherable accent throughout his life. His is the story of determination if nothing else.

Who knows when I’ll get to writing this paper for Conradiana. And though Conrad’s investments and entrepreneurial exploits were rife with disappointment, it’s nevertheless been inspiring to catch a very real glimpse of his enterprising and romantic nature through the prism of his daring ventures and investments. Of course this essence is very palpable in his writing- but it’s there too in the story of his life - that same mind-set so many of us in the world of entrepreneurship, start-ups and angel investing share.  His was a world of swirling winds and wooden ships, of long works written by candlelight, of isolation, imagination- and the mystery and promise of distant lands. Ours is a world of cloud-computing and silicon, of instant messaging, of twitter and the hunt for elusive sources of efficient clean energy.  Great uncertainty and challenge characterize both worlds, as always. And though the surroundings may change, the striving and determination in us to innovate and overcome persists. 

As Conrad himself wrote,

It is not the clear-sighted who rule the world. Great achievements are accomplished in a blessed, warm fog.”

Facing it — always facing it — that's the way to get through.

For the next post in this Series, click here.

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Mourning Angels: What Went Wrong With Your Investment? (Case Study #1)

Mourning Angels

This is part of my Series on Angel Investing.

Some readers of this blog who are interested in getting involved in angel investing recently suggested I do some case-studies as part of this series. I agreed and thought we ought to start by examining some typically negative scenarios that one inevitably confronts as an angel. Hopefully these case studies will stimulate some questions and further discussion from which we all can learn.

Eventually we'll work our way back to the core issue at hand: your own judgment of other people’s capacity. (See my earlier posts on this topic here and here).

(**Disclaimer: These case studies are not modeled after any person or any company in particular- they are designed for illustrative purposes only).

CASE STUDY ONE:

So you hear rave reviews about this guy long before you meet him. The people raving about him are actually some customers of his whom you’ve known for years and respect and who have successful businesses of their own that have benefited greatly from his product. You meet him. He needs some growth capital. He’s an industry veteran, a go-getter, knows the business inside and out, knows how to stretch a dollar and generally checks out at first glance. You and your small band of angels analyze the business and perform your supposed due diligence.  Things look good actually and he’s in talks with a potential acquirer. After a month of analysis and discussion, the investment gets made. 

In the beginning all seems fine. There is some initial growth, some promising leads, but after about 18 months you all realize that nothing is happening. There is no growth and the acquisition talks have broken down long ago. There is also very little communication lately.  You hear that he’s borrowed some money recently and is having trouble paying it back. You fly out to visit him. He’s friendly, but seems evasive, a little down.  He’s gained about 15 pounds since you last saw him. Now what?

QUICK ANALYSIS:

He may have got caught up in other things. He may be having marital problems. He may have made some personal investments in other areas when the going was good but then the market tanked. Remember- as an Angel, you are probably not on the Board and you are a minority shareholder.

             Q: So what are your options?

             A: Welcome to Angel Investing. You have none.

Questions for Discussion:

  • So what could you have done differently? Would a convertible note have helped rather than a traditional equity investment?
  • Did you really know this person? Did you make reference calls?
  • During diligence did you ever meet his family, see his home, see how he lives, what his hobbies are, etc.?
  • What does due diligence mean to you?

Let's discuss this case study and the questions I've raised.  Looking forward to your thoughts and comments.

For the next post in this Series, click here.

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Remembering Dersu Uzala, Siberian Entrepreneur

 Dersu smokes pipe

This is part of my Series on Entrepreneurial Culture.

It occurred to me recently that when you find yourself around folks that take great care to cultivate the particular ecosystem in which they dwell, the environment is always uplifting and enriching.  A recent venture event I attended of this kind brought to mind that great character, Dersu Uzala, who Kurosawa immortalized in one of my favorite films of the same name.  So as to set the stage for my main point, I’ll recall now one of the early scenes from memory, so forgive me if I omit some details.

On a freezing cold night in the Siberian forest a group of Russian soldiers are suddenly joined by a mysterious Nanai tribesman as they sit warming themselves around a fire. He seems ancient and does not greet them as they sit in stunned silence watching him as he slowly lights his pipe. After some minutes he breaks the charged silence and strikes up a conversation with them. It turns out that this is the beginning of their remarkable adventure with this nomadic tiger hunter who serves as their guide through the wilderness. The men soon learn that wherever he goes he is looking out not just for himself, but for those around him and who might come after him. Twice he saves the lives of Captain Arseniev and his men by virtue of his great experience and wisdom and in one scene they watch with fascination as he leaves some food behind in a remote shelter for anyone that might stumble there after their departure.

The Russian soldiers never forget Dersu. If you’re able to rent the film from NetFlix, I doubt that you will forget him either.  Let me know what you think.

We who make our livings in the world of start-ups also dwell in our own precious ecosystem comprised of entrepreneurs, investors, advisors, inventors and technologists. It seems to me that how we tend to it and how we treat each other along the way will be the ultimate measure of how much we can achieve.


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Deal Terms for University Spin-Offs

Oxford cool crowned head

This is part of my Series on University Entrepreneurship.

 Everyone asks about deal terms at some point, so we may as well address it sooner than later. Let’s say you’ve now visited a few tech transfer offices and you are ready to talk to their New Ventures person about spinning out some IP into a start-up.  What kind of deal terms should you be looking for?

The reality is that every deal is different and so it’s difficult to generate a one-size-fits-all response. Also be mindful that university tech transfer offices across the country vary greatly in their approach to start-ups.

Here are some very general guidelines to a fair deal that you may find helpful, however:

  • In most cases you should obtain an exclusive license to the technology in the fields in which you intend to operate
  • In most cases you should seek to back-end the economics of the deal and stay away from high up-front license fees
  • You should be prepared to partner with the university and let it have an equity stake in the company. (We will have a separate series of posts on equity considerations as there are many nuances here).
  • You should mutually agree to some diligence milestones that lay-out time-lines for things like first product sale and in some cases capital-raised or revenue targets. These should have built-in flexibility and not be harsh
  • Royalties depend a great deal on the industry in which you’ll be operating but should never be a yoke around your neck- allowing you to operate with a comfortable margin

If you’re not getting a deal done that reflects a win-win you should quickly move on, but such negative outcomes are less and less frequent. More and more offices understand the challenges of launching a start-up and, when a talented entrepreneur is at the table, increasingly have the right approach.

 

For Part Nine in this Series, click here

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Golfing-in-Exile (2): Getting it off the Tee

Old men with golf clubs indoors

This is part of my Series on Golfing-in-Exile.

We’ll get deeper into this in subsequent posts, but here are some initial tips for the GIE who plays twice a year and suddenly finds himself in some version of the following. (Tell me you haven’t been a part of this classic situation!):                       

So your friends show up to the course late, they’re still yapping on their iphones about liquidation preferences and getting rid of the CEO and of course, no one could hit balls before the round started.  You’re as tight as a board and haven’t stretched in 15 months. You’ve just seen the people at the clubhouse ring up your card for a $130 greens fee and you had to buy a pair of golf shoes with soft spikes on sale for $110 because the last time you played, hard spikes were still allowed and no one told you this had changed.  You bought a dozen Titleists (most of which you will lose during the coming round) for another $50 and before hitting a shot you’re out about $300.

You step up on the tee, address your ball and VC #1 is still in the cart getting angry at someone he’s talking to on the phone.  Your other hyperactive entrepreneur friend is moving all over the place and clearly visible in your peripheral vision. He almost hit you with one of his practice swings a few minutes ago. VC #2 is wolfing down a sandwich and potato chips not five feet away from you. Since you’re on the East Coast and it’s April, it’s still freezing and you have no “cold weather” gear because again- you hardly ever play golf.

Reality: if you don’t have my “Golfing-in-Exile Rules” memorized- you have a 1% chance of hitting the ball in the fairway.

Here’s what you need to do off the tee: (GIE RULES OFF THE TEE)

  • Keep some movement in your body before you initiate the swing. Don’t just stand there like a statue and think you’ll suddenly uncork a 300 yard drive. Move a little, get some rhythm, swagger, etc. going- feel the legs and arms and waggle the club some. A golf swing is actually an athletic movement- so holding perfectly still at address will not help you accomplish this despite what you may think.
  • Kick your right knee, (if you are a righty), slightly left toward the target at address, keeping it cocked throughout the swing. This will keep you centered and over the ball with a controlled swing.
  • Take a smooth and deliberate backswing. Most disastrous shots (mine included) are born of the warp-speed at which people’s backswings travel, which consequently throws the whole body out of whack.

Ok- so you got it off the tee- it wasn’t great- but you’re out there and not speeding off in your cart cursing to yourself as you hurtle towards your horrific annual round.  VC friend #1 is having a fake heart-to-heart with a CEO he is “letting go” next to you. You can tell he really wants to assassinate the guy for costing him so much money. He sliced his ball into some thick bushes and obviously needs an aspirin.

 Now what? We’ll discuss in the next GIE post.

For Part 3 of this Series, click here.


 

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Golfing-In-Exile "G.I.E." (1) Plotting Our Return

Napoleon in Exile

This is part of my Series on Golfing-in-Exile.

You think launching high quality start-ups is tough? Try playing golf sometime. I think the golfers among us will agree that it’s rather well established that golf is a tough sport to master. (For just why this is so, see this recent blog post by Paul Kedrosky and the flurry of comments it generated)

For the rest of you, just walk along the perimeter of any driving range (at a safe distance) and you’ll see a ridiculous show of lunges, swipes, contortions and seizures all parading as someone’s golf swing and you’ll understand right away.  Watch any given foursome tee off in front of you and witness the unfolding of another gran comedia.  And no, I’m not talking about a bunch of octogenarians either- we’ve all been active participants in this kind of slapstick mockery of the game. I’m sure that as I do, you know plenty of decent athletes who play quite often and never seem to improve.

Like most working-stiff entrepreneurs, however, I’m one of those people who hardly gets to play.  And because I can actually “hit-the-ball”, it only makes things worse for me, because I’m always struggling with high expectations when I do get to tee it up. 

I’ve coined a term for people like myself: “golfer in exile” (GIE). 

What I mean is that we’re basically like Napoleon on Elba plotting our return.  You had a few good rounds in the old days, you shot some decent scores, sank some putts- and then “life” caught up to you and took it all away. One day you woke up and became that guy who shanks it two fairways over off the first tee and 4 putts from 20 feet. So how did this happen and what can one do about it?

For those of you interested in this topic, I'll be penning an entire series of which this is the first post.

For Part 2 of this Series, click here.

  

 

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Five Qualities of Great Entrepreneurs

Afghan shop keeper

This is part of my Series on Entrepreneurial Culture.

I mentioned in an earlier post  that I’d eventually share my thoughts about what qualities I think make certain entrepreneurs more successful than others. For me, this isn’t just idle philosophizing. When I invest in companies as an angel, or when I entrust a university spin-off to the hands of an entrepreneur, character judgment has concrete, real world consequences.

Over the years I’ve picked-up on a few key qualities that most successful entrepreneurs possess.  Below are the five such qualities I’ve identified. Keep in mind that these qualities are interrelated.

Extreme Focus & Big Energy: 

Laid-back people, folks who are easily distracted and/or disorganized do not make good entrepreneurs. Those I’ve met who drive businesses to great achievement all possess a single-minded relentlessness and intensity. At times this dedication and energy can border on what mainstream society considers “unhealthy”, but I think this trait is probably required, for better or for worse.

Ability to Do What It Takes and Multi-Task: 

Have you met folks who mention in an off-hand way that “I don’t answer emails at night or on weekends”? Or have you met folks who tell you that “people exhaust me”. How about this one: “I’m good when you give me one thing to do but don’t send me a bunch of stuff at once”. They may be wonderful people, but rest assured, they are not destined to be successful entrepreneurs. Entrepreneurs who excel always do “what it takes” and always make the extra effort.  They can handle multiple tasks on a given day often in an atmosphere of great uncertainty. Perhaps most importantly they can deal with all sorts of personality types and don’t spend psychic energy complaining about how much they dislike so-and-so.

Self-Confidence and Flexibility:

Launching oneself into the realm of the unknown takes a great deal of self-confidence. It presumes that such a person feels he or she is equipped to successfully deal with whatever is thrown their way. New ventures are all about being prepared to address the unexpected obstacles and bad news with which you will inevitably be confronted. Generals say that the battle plan lasts as long as the first engagement with the enemy occurs. Mike Tyson famously said that his opponents’ strategy coming into the ring with him lasted up to point when they first received his fist smashing into their faces. The same is true for start-ups. It’s a game for confident people who can deal with reality. They have to be confident and flexible enough to change their plans and adjust their expectations based on the feedback their business receives where the rubber meets the road.

Communication Skills:

This particular skill is not necessarily required depending on the type of business you have. In the world of consumer internet companies, for example, there are plenty of ultra socially awkward entrepreneurs like Markus Frind (Plenty of Fish) and Tony Hsieh (Zappos) who are well known for their shy and retiring demeanor. However, in the case of both of these gentlemen, it would be hard to find other human beings on this earth who are more driven than they are. (Here’s Markus describing his own killer-instincts and relentnessness: http://bit.ly/4AZDu)

In businesses that require interacting with other human beings in the non-virtual environment, however, I do believe that strong communication skills are a pre-requisite for being a good leader. You need to convince talented people to work with you and you need customers and investors to want to do business with you. Articulate, clear-minded people have a huge advantage over other entrepreneurs who lack these skills.

Enlightened Stubborness:

This is perhaps the most elusive one of all. On one hand I actually do think great entrepreneurs are stubborn. They are stubborn in the sense that when they first struck out on their own they faced down all the people who doubted them and told them not to do it and not to stray from the primrose path of job security. They are stubborn in the sense that when certain people or certain old ways of doing things get in the way of their innovative businesses, they persist and overcome this resistance. And they are stubborn to the core when customers first tell them “No” and when competitors come after them with a vengeance.

So where’s the enlightened part? Well, although I have not actually met someone with this quality in the real world, I believe that the ideal entrepreneur would have an almost preternatural self-awareness lurking inside them amidst all this primitive stubborness. For example, they would have a sixth sense about when things just aren’t working and are flexible and confident enough to change plans. They would seem to know just when they’ve reached the point at which they’ve built the business up to the highest level they were capable of and are suddenly willing to step-aside for a manager with the right management skills to help take the company to the next level. Lastly, they would have the capacity to really listen to respected advisors and to take advice without bristling.

The reality is that no one person has all five of these qualities in abundance. And if they do, they’d probably have a bunch of other foibles that would diminish the effectiveness of the ones I’ve mentioned above.  Integrity, for example, is of paramount importance and the absence of it has been the Achilles heel for a lot of talented entrepreneurs.  My points above should thus be taken for what they are- a general guide born of my own experience and not some kind of definitive checklist.  Ultimately we all use our own judgment about the entrepreneurs with whom we partner or in whom we invest.

For my video conversations with great entrepreneurs: Venture Studio

For my ongoing Series on Entrepreneurial Culture: Entrepreneurial Culture

How America’s New CTO Can Help Launch Game-Changing University Spin-Offs

Aneesh chopra

This is part of my Series on Entrepreneurial Culture.

I was introduced to America’s new CTO, Aneesh Chopraa few years ago after a rousing speech he gave in Washington DC. Back then he was Virginia’s Secretary of Technology and I clearly remember being impressed by what a great a speaker he was and just how different he was from the typical government policy wonk we’ve all heard talking in broad strokes about the importance of technology, job-creation and the like. As he was finishing his speech people actually got up off their seats and started applauding. He had the whole place buzzing.

This was obviously a guy with great intellect who was talking specifics and who brought a tremendous understanding of the tech landscape to the table. Tim O’Reilly actually wrote the definitive post (http://radar.oreilly.com/2009/04/aneesh-chopra-great-federal-cto.html ) about Chopra back in April and it is well worth reading as it outlines his qualifications, his vision and the many initiatives he brought to fruition in Virginia. This is someone who actually gets things done!

I’m bringing Chopra up because he was recently interviewed by the New York Times http://bit.ly/PIPwJ  and specifically mentioned what he’d like to see change within University Technology Transfer:

“Mr. Chopra noted that among universities, there is a wide range in how effective they are in commercializing the work of their laboratories. He wants to take the practices used by the most commercial of universities and spread them to other research facilities.”  He also stated that “…. rather than purely thinking about basic research…. the government should focus on investing in technologies that can be developed. A first step is to find ways to actually measure how much research is being commercialized.”

These statements were quite stunning to me actually. First of all, a prominent government official was unequivocally stating that some universities are doing a better job commercializing IP than others.  Second, in terms of that age-old policy debate  that pits the funding of pure basic research against the funding of commercializable technologies, Chopra feels that government must also fully embrace the latter. This is refreshingly plain talk from a senior political appointee.  

So how do we make this happen? I believe that the best way for the government to help commercialize the country’s most promising university technologies would be through the creation of a special fast-track program.  This program would selectively provide proof-of-concept funding for breakthrough university technologies suited for a spin-off. Bridging this “gap phase” or “valley of death” as it is called in the industry, is the most formidable challenge we are faced with in the world of university spin-offs.  This money would thus be used to fund the vital proof-of-principle work that really needs to get done before talented investors/entrepreneurs can be incentivized to spin-off companies from the academy. I am specifically talking about funds for beta versions of software, prototypes for medical devices and animal studies for drug discovery projects.

Obviously these emerging spin-offs would have to address the innovation mission of the Administration http://www.whitehouse.gov/issues/technology/ : Modernized infrastructure: broadband, health care information tech, electrical grid & cyber-security.

The other crucial feature of this Program would be to assemble a world-class Selection Board comprised of successful entrepreneurs and/or investors with domain expertise in the relevant disciplines. This Board would not only select the country’s best spin-off opportunities but could also help recruit the right management for them.

Hopefully I'll be able to get this message to Aneesh because I truly believe it could lead to the emergence of game-changing university spin-off companies that could have a role in helping us transform this economy.

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Of Missionaries And Mercenaries...

There-will-be-blood-photo

This is part of my Series on Entrepreneurial Culture.

I just received an email from a young first-time entrepreneur that I am helping out informally on a few matters. He has a good product that he’s spent a lot of time developing and was looking for a few introductions and for help on some intellectual property issues. I had not heard back from him in a few weeks and so had no idea whether he had reached out to anyone or been able to make any progress on the IP matters. His email today was sort of a cross between a short update and thank-you note and I was happy to hear that some of the introductions and information had been helpful. If he ever needs anything else I’m definitely motivated to help him however I can.

I’m sure that for most people in the entrepreneurial community sending a short note like this is a no-brainer. Yet I’m bringing up this whole subject only because receiving this kind of note reminded me about just how often the opposite happens.  Sometimes, for example, you’ll make an introduction for someone to a potential investor, advisor or customer and you’ll never hear back from them. The message they’re sending is very clear. Essentially they’re telegraphing that their world view is one where people are simply a means-to-an-end. It brings to mind John Doerr’s memorable distinction between the mercenaries out there, (driven by opportunism, paranoia and the quick kill), and the missionaries (driven by passion and a desire to make a meaningful contribution).  http://bit.ly/oSx61

When I think back on the folks who saw something in me and helped me out in my career when they didn’t have to I’m incredibly grateful. I can actually count them on the fingers of one hand. I’ll be damned if I didn’t thank them and do anything I could for them whenever I could.

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The Three Most Common White Lies I’ve Heard Told to VC’s

Pinocchiocrop 

This is part of my Series on Venture Capital.

I see a lot of amazing things happen when investors and entrepreneurs interact. I’ve witnessed and been a part of many Venus-Mars moments, the rare love-fest and then of course, what I call the annual train wreck. Today I’ve chosen three questions that may come your way that you ought to understand when you’re out raising capital. I chose these specific questions from the multitude only because I’ve cringed at the responses I’ve heard so many times.

Q: So, how much money have you raised or invested in this company?

This question is actually the least loaded of the three I’ve chosen. It’s very straightforward. On three separate occasions this year, however, I’ve heard the entrepreneur, (who in each case had raised zero money), throw out a number in response that roughly corresponded to the non-dilutive grant money the company had received in the past, prior to his involvement. At least once this number was in excess of one million dollars and gave the impression of a large seed round of some kind. Whereas these responses were technically not outright falsehoods, I knew in each case that there was an intent to ‘slip this one by’.

One thing to keep in mind here is that the investor really wanted to know two things: 1: Have you put any of your own money into this company? And 2: Has anyone else put actual money into this company as an equity investment? If the company, (or the lab technology pre-company for that matter), received grant money in the past that is wonderful- but be specific about it. You are building a relationship with a potential partner after all. First of all it’s the right thing to do. Also, the investor will certainly find out eventually when he or she sees the cap table. So be clear and honest in all your answers. An example of an acceptable answer might be: “The company received some non-dilutive grant money from Gov’t Program Z one year ago, but no, we have no equity investors as of yet”.

Q: I see, so who else in the investment community are you speaking with?

Ok, so this is a rather loaded question. Some entrepreneurs greatly resent it and perhaps with good reason. They know full well that the VC will be calling any fund they volunteered by name soon after they depart the building. Georges van Hoegaerden of the Venture Company (www.venturecompany.com)  is particularly critical of this question and others like it and feels that it is an indicator of what he colorfully terms a “sub-prime VC” and the lemming mentality he so detests. http://venturecompany.com/opinions/files/detect_subprime_vc.html

But let’s put these macro issues aside for the moment. Let’s face it- when you ask someone to invest in your company, you have implicitly submitted yourself to entertaining questions of all kinds, (no matter how inappropriate). So how should one answer such a question? Well, here’s some practical advice. Don’t hem and haw and don’t start out on some long-winded, rambling and evasive story. Be prepared for how you want to answer this question. If you decide ahead of time that you won’t answer this, prepare an elegant response. For example, you could say something like “I’m talking to a number of funds but am really looking for the right partner who believes in this team and this vision”. If you’re willing to answer, do so and mention the funds with whom you’ve spoken. How you choose to respond is largely a matter of taste and personality I think, but the key is to have conviction, prepare and be forthright. Never hem and haw and never equivocate.

Q: Got it, so this is really interesting. What’s the valuation of the company?

Wow. This is the one question I’ve seen people botch from the most real-deal traditional conference-room pitch to the most academic ivory-tower business school venture competitions I’ve moderated or judged. I’ve seen the deer-in-the-headlight look take hold. I’ve seen presenters repeat the question in a near catatonic state…. “the valuation, the valuation…. well….”. I’ve seen the most confident and polished presenters suddenly look over helplessly to their partner for help.  Most often, however, people dissemble, equivocate, punt, smile nervously or giggle out loud in a strange and guilty manner as if their bluff has been called and the unforeseen moment of truth has arrived. I’ll leave the “Why” in all this to trained shrinks although I personally believe it is because presenters simply are not prepared for this stark, direct question.

So what to do? Again, my advice is simple. Prepare for this question! If you are confident in the business, in yourself and the plan you have put forth be ready to calmly state your pre-money valuation.  For example. “I’m glad you’ve asked. We’re at a pre-money of $X million and look forward to any other questions you have.”  If you’re not confident enough to set a pre-money valuation, maybe it’s best to ask yourself why before going out to raise capital.

What I’m trying to convey is this: Be prepared, be yourself, be honest. You win no matter what this way.

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Should There be Profit in Knowledge? A Century of American Debate

 Vannevar Bush and Policy

This is part of my Series on University Entrepreneurship.

I recently hosted a talk by Geoff Smith of Ascent Biomedical Ventures entitled: Should There be Profit in Knowledge? Geoff is a fellow Williams College alum and recovering attorney who, like me, got ensconced in the world of launching companies and venture investing in the mid-nineties.  He’s a Managing Partner at Ascent which is one of the few truly seed-stage venture funds in New York operating in the biomedical tech space. He also happens to be a Scholar at Rockefeller University where he founded and teaches the University’s Science & Economics Program. (See here for his bio: http://bit.ly/gbnAC)

One thing I learned about Geoff during his talk is that he’s really a very deep thinker about public policy as it relates to university tech transfer. His lecture covered the evolution of the intense American debate in this field over the last century, from the time of the World Wars up through the passage of the Bayh-Dole Act of 1980, taking us right to the present day. His analysis wove in the scientific norms of Sociologist Robert K. Merton,  the effect of the Ransdell Act of 1930, and the pioneering work of Vannevar Bush (one of the gentlemen pictured above), who drove so much of the ground-breaking government policy in this field. Lastly, I'll say that Geoff’s conclusions were not what one might have expected from a venture capitalist. He has a real reverence for the singular importance of basic research to our society.

I left the talk and ensuing discussion with both a deepened historical perspective and greater appreciation for the transformative effect on our society that a century of American policy evolution in university tech transfer has wrought.  I also emerged perhaps with a keener understanding of its boundaries.  Fascinating stuff and many thanks to Geoff.

 

For Part Eight in this Series, click here

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Raising Capital (2): Five Myths About Raising Capital

Oliver-twist-gruel

This is part of my Series on Venture Capital.

Let’s start by dispelling some myths about raising capital.

Myth #1: That because you've started a company, someone ought to fund it.

Fact: Actually, no one owes you anything. VC’s are in business to make money, not to take a bunch of fliers.

I am consistently amazed at how often I hear people complaining about how “vc’s don’t want to take any risks”.  Of course they don’t ! They want to de-risk deals as much as possible. Venture capitalists are already in the highest risk class of the alternative investments category.  Definitely keep this in mind when you are pitching your company to investors. Remember, fewer than 1% of start-ups actually receive venture funding.

Myth #2: That a first-time entrepreneur can raise Venture Capital money.

Fact:  Of the less than 1% of start-ups that actually receive venture backing each year, you can be assured that with few exceptions the leadership/track records of those companies are well-spoken for in the venture community.

If you are a first-time entrepreneur, 99.9% of the time you will be looking at funding your company with your own money, friends and family money, or, with angel money.

Myth #3: That investors will actually read your business plan

Fact: Investors do not read business plans. If they did, they wouldn’t be able to get any work done.

The way deals get done are through referrals to investors from trusted colleagues. A one-page executive summary is an acceptable way to initially share one’s company profile with an investor.  So never bother sending your 50+ page business plan  to someone unless they’ve asked for it. If you don’t believe me, see these links below from actual studies that have been carried out.

http://bit.ly/O4kO4   http://bit.ly/Cj92J

Myth #4: That a first-timer can raise money without serious proof-of-concept.

Fact: Unless you are Marc Andreesen or an uber-successful, cashed-out entrepreneur who has made his investors a lot of money, you will need to demonstrate a certain amount of traction before professional investors will even consider investing in you.

What I mean by this is as follows:

·        If you are a biotech entrepreneur, you will need to show at least strong results in animal studies.

·        If you are a medical device entrepreneur, you will need to show a working prototype, validation and support from multiple clinicians who would use such a product, as well as a clear path through FDA approval.

·        If you are a tech entrepreneur, you will need to show heavy traffic and consistent month on month growth to your site.

Myth #5: That because you have spoken to a venture capitalist about your company you are “in talks with investors”.

Fact: What this simply means is that you met someone that may or may not be interested in your start-up.

Spare yourself a lot of heart-ache and lower your expectations. If you’ve had a conversation or pitched someone who happens to be an investor, don’t get your hopes up until they are actually ‘in diligence’ and you have a term sheet.

Raising Capital (1): What’s it Really All About?

Raising Capital_Register

This is part of my Series on Venture Capital.

‘Raising Capital’ for one’s start-up is perhaps one of the most talked-about and important aspects of early-stage entrepreneurship there is.  And despite the amount of attention and discussion the topic receives, I also think it is perhaps the most misunderstood of all.

At some point, all start-ups, (whether they be university spin-offs, services/consulting companies and/or technology companies), that aspire to some conventional measure of growth and success will require operating capital of some kind.   As someone who over the past sixteen years has raised millions of dollars in capital both for my own start-ups and for several dozen university spin-offs, I’ve definitely developed a feel for what I believe works and for what doesn’t work.

In this series we explore the challenges, myths and rules of thumb that apply to this process and of course welcome your input.

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