Venture Learnings

The Bionic Body Shop

2008-06-03T03:20:31Z

Advanced medical devices are the tools that enable humaand robots to merge, perhaps signalling the dawn of a technological singularity. How close are we now? Take a tour and shop around — we've been cramming more intricate engineering into our bodies than you might think.

Sources: Cyberdyne; Cyberkinetics Neurotechnology Systems; Cyberonics; Deka Research & Development Corp.; Digital Angel; Given Imaging; Let Them Hear Foundation; Mark Kroll; Medtronic; National Pain Foundation; Otologics; Otto Bock; Ossur; Paul Holtzheimer; Second Sight Medical Products; Scott Shikora; Synapse Biomedical; Thoratec; Touch Bionics.

Direct Marketing for Money

2007-06-20T10:15:00Z
More on how to get money from a venture capital firm. In my first blog on raising money (Raising Wine Money) I described a ‘traditional’ route to getting a venture opportunity considered and funded – networking. (As I understand it, Sean Fanning, co-founder of YouTube, a company that started, got funded, and sold to Google for $1.6 billion in under two years, is the son-in-law of Jim Clark, arguably the most bankable (and banked) entrepreneur in Silicon Valley. I doubt his marriage was an entrepreneurial run at networking, but his marital connections didn’t hurt, either.) So what to do if you aren’t connected to powers in the industry or don’t marry well? ]]> is a strategy). 1. Have a great idea that other smart people really like. (Market research.) Having your spouse, kids, or friends like it doesn’t count. 2. Have a great idea that you pitch to your company and the company is too stupid to do it. Then go get money to do it. You will have more credibility with investors than if you work at a semiconductor company and come up with the world’s greatest idea for an exotic travel website. 3. Pick something that is cheap to start and can be started in a garage. It is much easier to raise money in Internet land when you have happy customers clicking away and bringing their friends into the site than when you are pitching SlideWare. Quite often, when you pitch for money, you will be facing investors who have seen lots of companies with rapid growth of users, transactions, etc. from angel or sweat equity and consider those lower risk than deals where the company is still a glint in the eager founder’s eye. 4. Select your target audience. Mass marketing can be cheap per impression, while direct marketing can be expensive, so you want to limit the wasted impressions. This involves doing media research (mostly the VC websites) to try to find the firms that are looking for deals like you offer. There are more VCs out there than I can count, and everyone is looking for something. So view the VC sites as profiles on a dating page. 5. Don’t send plans over the transom, or to the ‘submit your plan’ link. 6. Match the fund size and investing appetite to your capital requirements. A $100 million fund is not going to fund a $10,000,000 deal, and a $500 million or billion dollar fund is unlikely to process a $250,000 deal (with the exception of taking an early stake with an option on future rounds). 7. Email works most of the time to get your story considered, but it needs to be crafted as carefully as a prospectus, only infinitely shorter and more interesting. Subject lines with ‘Introduction,’ ‘Investment Opportunity,’ ‘Startup’ are not going to get opened. But if you have, say, a company that is getting traction in online dog bed sales, and you find investors who are keen on e-commerce and dogs, then ‘eCommerce opportunity for dog lovers’ is not a bad way to start. Better yet, send the targeted VC a doggie bed. 8. Ginzu Knives always work. If ProVina, the wine company hadn’t known T.J. Rodgers who ran into me and made the introduction, then a bottle of their wine, nicely packaged, with a note inside with pictures of the new product and the pitch that ‘this wine is the wine of the future and you can make billions from it,’ would have gotten through my screen immediately. Use your imagination. If you don’t have one, don’t try to start a company. Every marketing writer dreams of the ultimate headline, like the World’s Funniest Joke portrayed by Monty Python (so strong, people who read only part of it got ill, and those that heard or read the whole joke died laughing). I am a longstanding marketing writer. This essay is marketing, of course. I am promoting my firm and myself. So I fantasize that by writing this I am going to create a flood of tchotchkes from hopeful entrepreneurs to venture capitalists. If you want an opinion on the effectiveness of your tchotchkes and how it might work, by all means send one to me and I’ll give you a quick opinion. (By the way, I am an active golfer and, if you hadn’t guessed by now, a wine lover.)

Raising Wine Money

2007-06-20T10:10:00Z
How does one go about getting money from a venture capital firm? I have been at work in a venture capital firm for nearly ten years with one title or another. I have led or joined investments either independently or with VantagePoint Venture Partners in at least 20 companies. I have sat in at least a thousand presentations by entrepreneurs who are trying to get money. (The math of 20 against a thousand sounds bad, but about 20% of the deals I looked at got money elsewhere.) I still can’t figure out why one deal gets the interest of many investors while others languish. (Maybe I should change careers.) ]]> Technology risk. The product development will take too long. It will cost too much. The product won’t do enough. Market risk. The market is not big enough. People aren’t ready to buy. No one has ever bought this before. Management risk. The team is not complete. I don’t like the CEO. I think the CTO smells funny. Competitive risk. Intel will respond and crush this company. Oh, that was the 80s. Microsoft will respond and crush this company. Oh, that was the 90s. Google will respond and crush this company. Oh, that is so 2005. Rumor has it Cisco’s founders visited over twenty VC firms before they found Sequoia, who are possibly the industry’s most successful contrarians. I would think contrarian thinking would be a requirement for the business, but if you look at the actual behavior, there are often feverish races to invest in deals that look like the ones that other investors like. Sometimes I feel sheepish. In any case, here is one way to get a venture investment, a true story. I am riding on a plane from Chicago to San Francisco. There is a tap on my shoulder. It is T.J. Rodgers, who is sitting across the aisle with his partner Valeta. When I ran a high-tech ad agency, T.J.’s company, Cypress Semiconductor was one of my clients for many years. But that is another story. T.J. is from Wisconsin, an avid Green Bay fan, and they are flying home from the game. Go figure. T.J. Rodgers took several tries 20 years ago to get his idea for a CMOS semiconductor company funded. After a lot of work, the contrarians at Sequoia and Sevin Rosen backed him, and he led Cypress to become a significant semiconductor company, building the first plant from scratch in an area of San Jose that is now, twenty years later, practically downtown. He is a true technology nerd, but a nerd with money, which is a scary thing. He decided he could improve on how the French make Pinot Noir (using, you guessed it, technology) and reputedly got into some disagreements for blasting out caves for the wine on his lands on the outskirts of Silicon Valley without, so I understand it, the appropriate cave blasting permit. His ‘Clos de la Tech’ sells for $100 a bottle. T.J. has put a little money (an angel investment) and some of his technology for monitoring the fermentation of wine into a startup. The startup founders are semiconductor engineers who decided the world needs a peripheral for the computer that makes wine. T.J. knows I am a VC, knows I like wine, figures I am the right guy for this one. So an email or two later and the founder has sent me the plan. Since I focus mainly on Internet media and marketing, I am not going to lead this one, but my partners, and particularly the head of my group, Cynthia Ringo, can be contrarians, and this one is certainly contrary. Who will spend $3500 for a home wine machine? Where is the market proof? Are we crazy? Fortunately, the founders had actually built a working prototype, fermented some very tasty wine, and the presentation went very well to the partnership once enough wine had been consumed. In the end, the founders got a term sheet and as I write this the company is on the road to a funding and launching of the product. The moral of the story? -Know an important tech guy? Helps. -Have an important and influential angel? Very useful. -Have a vision (or double vision) and make it happen? Totally helpful. -Have a demo that lowers resistance? (I worry that they put the investing equivalent of rohapomyne in the sample wine). Very important. -Be able to articulate the story in a way that gets investors excited? Kaching! (More on that later.)

Venture Learnings

2007-06-20T10:00:00Z

By way of introduction, I'm David Scott Carlick and I have been in the ‘entrepreneurial ecosystem’ now for almost thirty years. I started an ad agency in the late 1970s in Silicon Valley to serve the needs of startups, which I eventually found out were backed by ‘venture capital.’ Over that time, I worked with hundreds of companies and thousands of new products and ideas, some of which became institutions, some of which blossomed and then withered, and most of which never got anywhere meaningful. So I have a lot of experience, and experience, as you all know, is what you get when you don’t get the money. VantagePoint Venture Partners where I have worked in some capacity or other, investing in twelve companies, seeing the first seven implode during the dotcom bust, and seeing others go on to success, including most notably Intermix Media, which spawned and owned MySpace and which sold to Fox in 2005. I have lots of opinions on this subject. (Those of you who know venture capitalists know that the mere anointment of that title bestows the ability to speak authoritatively on any subject.) And I have any number of comments to make on venture startups and engineers, from comments Dilbert to comments on marketing communications, which Dilbert regularly subjects to appropriate abuse. (I have long maintained that those who do, do. Those who can’t do, teach. Those who can’t teach, teach P.E. Those who can’t teach P.E. go into marketing. Those who can’t do marketing go into marketing communications. Of course, I can make this point because I did exactly that, and because now my entire portfolio is new companies that are using technology to redefine marketing communications.) So I am going to dedicate my first entry to the IEEE Spectrum Venture Learnings blog to an engineer. Aart DeGeus, the founder of Synopsys. Aart spun Synopsys out of General Electric (I recall) which also spawned Calma Systems, one of the earliest computer workstations for engineers. Harvey Jones worked at Calma, then helped found Daisy Systems (along with the renowned Vinod Khosla, who went on to start Sun and then join Kleiner Perkins, one of the most famous VC funds). Harvey was recruited by venture capitalists to be an Entrepreneur In Residence, which means Looking For A Deal To Run. The deal they found was Synopsys, and the engineer who was there was Aart. Harvey Jones has a golden touch in high technology, but ultimately Aart DeGeus stayed on with Synopsys, became the Chairman and CEO, and runs the company to this day. In all of my many many times working with companies to try to market their products, I really knew the company was on to something when the engineers could describe the product and its benefits clearly and understandably. There are lots of people who will spray you with jargon. They are fully buzzword compliant. But the higher you go in any quality organization, the more simply and persuasively the people can define and explain the organization. And the more simply and persuasively an engineer can define and explain their products, the higher that engineer will rise within the organization. And if you don’t believe me, ask Aart, who had a profound and persuasive way to describe the business benefits of allowing engineers to work productively with increasing levels of abstraction, moving to concepts from details and letting the hardware and software do the dirty work.
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