ShareI just bought and started reading this cool book written by a group of successful entrepreneurs and VCs including Howard Leonhardt, Brad Feld, Dave Berkus and other greats. Twitter: @RomansVentures Confessions from an Entrepreneur (Volume 1) The book is priced at $4.99 USD; so you can’t go wrong. I am pushing McGraw Hill, my editor, to lower the price of my book and hitting a brick wall there. Self publishing has its advantages! BTW, I just checked Amazon and the price of my book seems to drop over the weekend and late at night. I guess Amazon’s algorithms are like airlines knowing when customers are price sensitive and not. Here are some nuggets emailed to me from my friend Howard Leonhard (@howardleonhardt), one of the co-authors. • All businesses must be customer-centric. • Improve your company, product, and service a little bit everyday. Driven primarily by customer input. • Start selling and marketing from day one. Sell your idea to everyone all the time. • It is all about building a bandwagon of supporters, often one by one. Your network of supporters IS your company. • Marketing is everything. • Preach to the choir! • Reward excellent failures and punish mediocre successes. Nothing will drag a company down deeper than a culture of rewarding mediocre successes. Innovation that drives breakout companies does not come from the safe path. • Make a list of things to get done and get them done. • Keep things simple. • Strategic plan should be DOING things day one to serve customers or future customers not talking about it or planning for it. •...
ShareIf Jack Kerouac, author of the American classic On the Road, and his travel buddy Dean Moriarty were alive today they would work at a startup and it might be Dealflicks. A 500Startups company we invested in at Georgetown Angels has two of four members from their cofounding team along with two new college degree minted sales associates, traveling across the country in vans (car jacked from their parents) and are signing up cinemas to their business which enables users to get instant discount tickets to movies from their mobile phone or the fixed web – think “Priceline for movies.” The Sales Team is literally on the road sleeping in the van, showering at the gym or fast food restaurant sinks, probably meeting women 5 nights per week, and seeing the country while building an amazing startup business they own. The founder of a very successful online price comparison company once told me over drinks in Stockholm that the reason B2C is better than B2B is not that the valuation multiples of revenue to enterprise value are 3x to 7x better than B2B, but because he can explain his shopping business in a bar and women get excited about his shopping business rather than explaining the backplane of his ATM packet switched telecom signaling gateway router he hopes to sell to Cisco one day which puts everyone in the bar to sleep. (This is a real photo of the Dealflicks guys on the road in the “manvan”.) They literally calculated how much they are saving by not paying rent to live in San Francisco and spend that on...
Share September 18, 2013, by James Grundvig http://www.huffingtonpost.com/james-grundvig/the-practical-bible-for-venture-capital_b_3942234.html The Practical Bible for Venture Capital: Book Review and Interview With Andrew Romans The tech start-up ecosystem of Silicon Valley and other major hubs, such as Austin and New York City, is similar to the Hollywood movie industry. How’s that? Young creatives, looking to launch their ideas and bring them to reality, need to wade through an arcane process. They need to tap dance with new terms and jargon. And they need to understand the subtleties of financing projects and the agreements they will one-day sign. By the way, the term “angel” investor came from film industry in the 1930s. Who knew? That historical nugget and many more valuable insights on venture capital can be found in what the investment industry has been missing, a bible that is far more impactful than a how-to-book or an exposé on a VC’s hits and misses. Like a margarita, it’s easy to make a bad movie. But to make a good one takes skill, planning, and industry know-how. Building startups from concept into real businesses is no different. Most startups fail for a variety of reasons. It takes more than products, solutions, and capital. Just as important to entrepreneurs are the investors’ contacts and networks they bring to the startup. The financing process for startups is a challenge for entrepreneurs at the “seed” stage, whether in the form of a bridge loan or an equity stake, and even more so during the bigger dilution that comes with Series A financing, or what is considered institutional venture capital territory today. Should an entrepreneur give up...
ShareThis post comes from a bit I wrote with a friend of mine Oded Hermoni for my book, but my publisher McGraw Hill, decided to cut my chapters on Israel and Europe and save those for my next books. I wanted to share this now as we will re-write it all from scratch. Oded is a good friend, a member of the advisory board of The Founders Club, investment director of the Rhodium family office, which invests in early stage technology companies in Israel and the US, and former Head of the Israeli High Tech Industry Association. I have portfolio companies from Israel in The Founders Club and love my visits there. In addition to a book tour event in Tel Aviv September of 2014, I plan to organize an exclusive off-site summit for 50 of the most successful entrepreneurs, VCs, angel investors, lawyers and bankers in Israel to first discuss and debate and then agree on who will write what for my next book focused on the venture scene in Israel – what has happened (past successes putting Israel on the map), what is happening now and what needs to change to make Startup Nation – Big Company Nation. It’s an exciting place and an exciting topic. Here is the piece Oded and I wrote. Thank you, Oded! Start-up Nation: The Story of Israel’s Economic Miracle is the title of the well-known book written by Dan Senior and Saul Singer in late 2009 and in a way summarized the way Israel became a landmark as a big hub for innovation in the past decade. Israel for many years has been...
ShareAn active seed stage VC sent me a deck with this information about early stage valuations which I found very interesting. Early Stage Valuations 2006 – 2013 2006: $2-3m pre 2007: $3-4.5m pre 2008: $2-2.5m pre 2009: first $5m caped note appears from YC 2010: $6-$8m capped notes 2011: $8-$12m capped notes 2012: $6-$8m capped notes 2013: $5m-$6m average, upwards to $8m capped notes This shows the rise of the convertible note, the dip of 2008 and quick recovery for hot startups. Keep in mind the above numbers only apply to the “hot” startups. Although these numbers are one investor’s perception of the market, it is hard to lump all seed rounds together where some are emerging from YC with energetic plans, but no traction or revenue and others are startups that have been building their business and growing revenue and still raising funding from angels and seed funds on convertible notes. So these all get lumped together. If one considers that most companies will be sold for under $30m and most sophisticated angels need to see the real chance of making a 10x return on each investment to make up for the other failed investments that go along with this level of risk I think $3m is a good valuation for the very high risk hot early stage investment. Unfortunately, this often makes raw startups a young man’s game as the dilution at that valuation level does not raise enough money to support an older set of founders with higher family burn rates. Those older founders are expected to have already built up some personal capital and be...
ShareThis is a bit I wrote for my book and when forced to cut from 1,000 pages to 600 to 200 this part was removed when we actually just cut out all the chapters on Europe and Israel, but I think it’s great for entrepreneurs, investors and bankers to understand – copycats. “Good artists borrow, great artists steal.” – Pablo Picasso Christian Saller is a textbook case of a German copycat executed nearly flawlessly. After three years working as a young investment manager at Target Partners, one of Germany’s premier VCs, he decided he could do better as an entrepreneur. He examined the deal market in the US and Europe and decided to make a copycat of Kayak, the travel search engine. In October of 2006 Christian founded Swoodoo, an exact replica of Kayak, but focused on the German speaking parts of Europe or “DACH”: Germany (Deutschland), Austria and Switzerland (Confederation Helvetic). Swoodoo and Kayak came along at a time when travel search was dominated by sleepy Travelocity and Expedia. These businesses make most of their money by helping the user find the cheapest flights, hotels and car rentals, then getting paid by the winning airline, hotel or car rental company for delivering a new customer. They are paid a bounty for lead generation from the travel company that wants the new customer. The trick is to develop the business so that the cost of bringing a user to the web site and complete a transaction is less than the amount of money generated from the transaction. Once that trick has been solved, it is a matter of scaling...
ShareI had initially planned to close my book with this contribution that was written by a good friend of mine, but McGraw Hill, my publisher, forced me to reduce page count from 600 to 200 pages. Here it is. And finally, this last piece comes from a good friend of mine who is also on The Founders Club advisory board, Jakob Algreen-Ussing, an accomplished entrepreneur who runs his own VC fund out of his home base in Ibiza and his offices in London and Copenhagen. If you want to get to know his ideas more you can check out http://jakobussing.com/. Flow in Business – Jakob Algreen-Ussing, founder & chairman, Akasha Ventures Many times I sat in a management meeting or boardroom sensing that something was not being correctly handled. Although I often would not be able fully to articulate the problem I sensed in a rational or meaningful way, without a doubt I knew that something was wrong. Some would call this gut feeling; others, intuition. Eventually, and through the work with business I have realized that this goes much further. Looking at the historical development of how we have conducted our businesses, we can see how it has evolved. We have grown from product-centric companies, focused and specialized in mass production. This abundance of material goods has allowed us to expand our consciousness, making the stories and values behind the products as important as the product itself. This has caused a change in the way we do business. In the ’70s, ’80s, and ’90s, branding and communication associated with products became the key point of running a value...
ShareWhen I think of VCs in the UK, Nordics and the Continent this list seems to be missing a lot of the major players, but I still found this post from Mike Butcher at TechCrunch to be pretty interesting. VCs often do NOT publish on their web sites how much funding they raised and when these funds closed. This information is important so that entrepreneurs can better understand where any single VC is in the investment cycle of their fund and how that fits with the current or future rounds of the startup raising funding. As Earlybird Closes New €150m Fund, LPs Warm To European Tech Valuations Christian Nagel, one of the co-founders and GPs at EarlyBird, is also on the advisory board of The Founders Club. Nordics Creandum
Latest Fund: €135m
Total funds under management: €210m Northzone
Latest Fund: €130m
Total funds under management: €350m Sunstone (EU WIDE)
Latest Fund: €85m
Total funds under management: €700m Germany Earlybird (EU WIDE)
Latest Fund: €150m
Total funds under management: €650m Target Partners
Latest Fund: €113m
Total funds under management: €225m Wellington (GLOBAL FUND incl US)
Latest Fund: €80m (life sciences though) – last “all in” fund was €265m – global fund
When: 2012 – last tech fund was 2008, global approach
Total funds under management: €800m UK Accel (EU WIDE, some US)
Latest Fund: €359m
Total funds under management: €1.5bn in Europe (guesstimate) Atomico (GLOBAL)
Latest Fund: €215
Total funds under management: €340m Balderton (EU WIDE, some US)
Latest Fund: €328m
Total funds under management: €1.5bn (guesstimate) DN Capital (EU...
ShareSomeone recently asked me what I thought about corporate VCs. In brief, I like corporate VCs (CVCs). No need to be afraid of them. Just take the meeting and see what they can do beyond cash for equity. They may be able to provide vendor financing where they provide servers or data center floor space, or something else of value. They may leverage their sales force to sell your products and services with a lot more credibility than your unproven startup. Startups are challenged to win customers and when you have a joint press release that a multi-billion dollar technology company is partnering with your startup to disrupt some industry that is a great way to get the attention of clients, financial VCs and competitive buyers. I raised $25m vendor financing from Lucent Technologies alongside a $15m cash series A from a financial VC for my own firm that I founded in the 90’s. Then I changed sides of the table and as a VC banker I raised vendor financing for a client from Huawei with support of China Development Bank (CDB). More recently some of my CEOs in The Founders Club raised CVC funding in the biotech sector and it seems that to some extent it is hard to get a VC funding round done without a CVC in biotech or even direct investment or support from the corporate itself. There are lots of classic tech companies in the Silicon Valley that will co-invest with VCs when they can see a strategic fit for their own programs. CVCs can be slow to wire funds and mostly will never...
ShareAt Georgetown Angels when we get a VC to commit to the Series A financing for example $5m, just at the last minute I have my CEO say to the VC, “Wait, I don’t want the check for $5m. Make that $4.5m and here’s a list of 20 people that will invest $25k each after the $4.5m has been wired. The names on that list are all CEOs and co-founders of major league companies scattered across the US, Europe and Israel. Then when we announce the Series A financing with <your big name VC fund> we disclose that these 20 people also participated.” The names on that list are a who’s who of VIP entrepreneurs. People will wonder how a company located in Stockholm, for example, managed to get those people from the Valley and all over the world to invest in that round. I first saw Rick Marini, CEO of Branchout, do this. Branchout is basically Linkedin on Facebook. He tells his story in detail in my book. If you go to his web site and click on his investors, the list is amazing – Shawn Fanning from Napster, Michael Birch from Bebo, Naval Ravikant from Angel List, Dave Morin from Path, Matt Mullenweg from WordPress, Chris Michel from Military.com, Tickle co-founder James Currier, and others. When we do this for our companies at Georgetown Angels it gives you a Branchout rocket launch. It may be counter intuitive to add angels after the VCs, but it’s a brilliant move. And those angels are lucky to get in. At $25k being a small amount for them, they don’t care...