There are a tremendous number of companies looking for access in the space of early ventures. It is hard to compete against all the din.
This year’s Founder Showcase included a few dozen interesting companies at the booths. So it is not strange how even a very sophisticated and advanced companies can get overlooked.
So, what do venture capitalists look for?
Each level of the selection process for a startup is brutal in its selectivity and uses a different filter. The filter applied at the Founder Showcase was one of popularity. This induces biases that businesses and investors wouldn’t have.
One start-up, Quarrio, was the only company using AI to solve a hard problem – one of making data in tables accessible using plain English. It is a usable and complete product relative to others at the showcase. It was filtered out of the pitch competition.
The pitch competition included a selected few companies:
Makerblok: Making educational electronics for children.
Ampl: A bag that can charge all your devices so that you don’t have to worry about charging each device. Is cool but is too heavy.
Theo: MLS quality data (much more accurate in price compared to Redfin). Also there is an argument that there are many features/amenities that Real Estate agents desire.
keepe: This is a startup based in Seattle offering handyman services guaranteed in 1 hour.
Trato: This company serves up customizable legal documents to make it easier for the masses to do business.
On the Problem: VCs generally want to know how much pain is there in the problem. Who faces the pain and how much the solution removes the pain. How big the market is.
Solution: They need to know how the startup solves the problem. How credible the solution is. If there is a technical moat around the solution. Sometimes the moat is market share. If so the biggest advantage is swift execution.
Scaleability: Building connections one at a time is hard. There has to be a plan to reach people quickly. There is a lot of noise around. There should be a plan to get the business past the noise.
Capital intensity: The question here is how much money needs to be invested in the solution before it starts cash flowing. High capital requirements increase the risk.
Team: Investors look for teams when investing. Teams increase stability and credibility. A team with a background in their field of expertise is more likely to create a moat of competence. Similarly a team that has worked together for a long time is likely to work well.
Generosity: Kickstarter is another example of a generous startup that has succeeded by making many other people succeed.
A life-sciences called Suntowater was voted the best in this Founder Showcase event overwhelmingly by both the crowd and the judges. It solves the problem of clean drinking water from the humidity in the air using electricity generated by a solar panel. This innovation is considered generous because it is most useful to the underdeveloped world.
The general recipe for a successful startup is to relate to people, then promise a great future and connect the dots.
Chamath Palihapitiya, Founder of The Social+Capital Partnership, had great insights to share about the makeup of a wildly successful startup in the future. One source of information is the trend in the tastemaker in society.
In an earlier era individuals and companies paid a lot to get attention from consumers through selection by the tastemaker: companies such as AOL who rented their landing page for millions or radio stations that chose the music to be played.
Now the mechanism of taste selection has become “likes” on Facebook where everyone has a say. The downside of this mechanism is the noise. Facebook is likely to face creative destruction as the pendulum swings.
Chamath thinks that the next generation of companies will have multiple lightly curated channels either selected by humans or by algorithms. An example is Patrion, where people support the art they like, similar to Italy during the Renaissance.
Fixing education is an interesting problem. Linda frames education as a way of learning skills. This is more enlightened than the idea of education for its own sake. Startups that solve a problem can expect better reception.
In the past software giants like Microsoft and Oracle were dominant.
There has been a shift towards SaaS.
The next shift is expected to be towards outcomes as a service such as Uber.
For the investors, Warren Buffets letter to shareholders says that he sat on money for over 1/3rd of the time.
Chamath expects a funding hiccup in 2-3 years. Many companies are raising a lot of money in the current bubble. The easy money has to end at some point.
Companies that don’t have a sufficiently good product to market fit will suffer. But it’s mostly their employees who have given up pay to get stock options who will lose big.
Chamath’s advice to entrepreneurs is to raise money when the going is good and sit on it till the company figures out a good product to market fit.
Did you know that Peter Diamandis didn’t have 10M$ when he announced the 10M$ prize? Nobody asked about the money since he cleared the line of credibility. He had astronauts and the NASA chairman beside him when he made the announcement. Strangely, the winning team spent about 30M$ to earn the prize.
So, where did the money come from?
Peter approached about 150 people who declined to fund the prize. That is a lot of rejection!
Richard Branson declined to fund twice. After a lot of insecure moments, they found that there is insurance against unlikely events that could cover this event.
A private company going to space was considered unlikely, so he was offered a $3M premium to insure against the outcome. He negotiated it down to a 50k/month premium. Then it was a question of finding people who would support the bet on a monthly basis. This spreads the pain out, but it lasted for ever.
Richard Branson marched in weeks before the prize was won with an offer of $250m to commercialize the winning tech so that he could have his picture taken with the winners.
I have a great appreciation for those in the 1% that give back, especially those like Richard Branson, who became an entrepreneur specifically to finance his desire to give back or, as he says, “do good by doing well.”
But even the most philanthropic like their toys — especially the kind with four wheels.
AeroMobil was designed in a way to fit into existing road infrastructure – its size is comparable to a limousine or a large luxury sedan. It has low maintenance costs and can be parked in regular parking slots in cities. It uses standard gasoline instead of kerosene, and it can therefore be fuelled at a regular gas stations.
You’ll need flying lessons, but it sure beats those fancy, earthbound cars — they’re so common.
There’s been a social media firestorm since Tom Perkins had his say in defense of the so-called 1%.
I asked a retired serial entrepreneur who was funded by KPCB decades ago when the names on the door were actually working partners what he thought.
Tom was reasonably liberal when he was running KP. Many VC’s who had made tons of dough became very conservative as they aged, supporting right wing Republican and Libertarian causes. They seemed to regard it as an insult that the government was trying to take even a tiny smidgeon of their billions in taxes.
I get why Perkins comments incited so much noise, both sincere and politically correct, but the real story a few days earlier didn’t get the play it deserved.
Here’s the headline that should have gotten more attention.
This means the world’s poorest 3,550,000,000 (3.55 billion) people must live on what the richest 85 possess.
The statistics are from non-profit Oxfam and are neither political nor partisan—they just are.
Nor are they an indictment of the US, since they are global.
In line with the mantra of “think globally, act locally” what can you do to help change this?
KG Charles-Harris says,
“It’s really action in the little ways that makes a difference. Not everyone has to do big things, but small things are possible every day with little cost.”
Here are some ideas,
Choose your role models more carefully; Richard Branson, Bill Gates and, more recently Mark Zukerberg are all in the 85%, but they model their lives very differently from Larry Ellison or the Koch Brothers.
Commit to giving one week’s worth of what you normally spend on coffee to a cause you care about.
Do the same with the time you save.
I’ll end by borrowing a line from a 1971 Alka-Seltzer® ad, “Try it, you’ll like it.”
According to Daniel Isenberg, “entrepreneurs are contrarian value creators. They see economic value where others see heaps of nothing. And they see business opportunities where others see only dead ends.”
But Isenberg also believes (along with many others) that “the main motivator for entrepreneurs is the chance of making big money.”
Richard Branson believes, “If you get into entrepreneurship driven by profit, you are a lot more likely to fail. The entrepreneurs who succeed usually want to make a difference to people’s lives, not just their own bank balances. The desire to change things for the better is the motivation for taking risks and pursuing seemingly impossible business ideas.”
Branson has a great belief that Profit and social good are not an oxymoron or mutually exclusive.
In Screw Business As Usual Branson says that from the very start his entrepreneurial drive wasn’t for money, but to have the wherewithal to fund his charitable efforts.
And over the years he’s done exactly that by funneling much of his wealth into Virgin Unite and through Virgin Unite to many entrepreneurs in the developing world and beyond, as well as creating and funding The B Team: “Our mission is to deliver a Plan B that puts people and planet alongside profit.”
As Sharlyn Lauby, our August Carnival host, points out, we’re already a third of the way through third quarter! My, how time flies when you’re having fun—or fighting fires.
Along with the great posts this month, she queried everybody for their book recommendations, especially useful to the heavy travelers among you or those who just prefer curated reading lists. So without any more blathering on my part here is the carnival. Enjoy!
Joel Garfinkle, author of Career Advancement Blog, shared the story of a manager overcoming being passed over for a promotion in “How to Get a Promotion After Being Rejected”
On his summer reading list was “A Thousand Farewells: A Reporter’s Journey from Refugee Camp the the Arab Spring” by CBC journalist Nahlah Ayed
At the Driving Results Through Culture blog, S. Chris Edmonds utilizes the recent sanctions against Penn State to start a discussion about “Gauging Your Organization’s Integrity”
He’s reading Mark Levy’s “Accidental Genius: Using Writing to Generate Your Best Ideas, Insight, and Content” – and says, it’s well…genius.
He recommends reading “The Advantage: Why Organizational Health Trumps Everything Else in Business” by Patrick Lencioni followed closely by “Great By Choice: Uncertainty, Chaos, and Luck – Why Some Thrive Despite Them All” by Jim Collins and Morten T. Hansen
A McKinsey study on the value of corporate social responsibility found “…highly innovative Fortune 1000 companies derive greater financial returns from their corporate-responsibility activities than their less innovative counterparts do,” and suggested three actions to improve CSR ROI,
“Upwards of 40 percent of industry’s energy efficiency improvement opportunities can be realized through low or no-cost projects rooted in corporate culture change”
They must know something since dollar savings to date are not millions, or even hundreds of millions, but billions.
“The key to this model is the formation of multi-disciplinary, cross-functional site teams, with insight from operators, maintenance, mechanics, core process experts, energy experts, engineers and management.”
Two of the biggest stumbling blocks on this path are Wall Street, with its short-term, i.e., quarterly, focus and the current definition of “stakeholder.”
Typically, stakeholders are viewed as investors, management, customers and workers; progressive companies have added the local communities where they do business and a few have tiptoed further.
Whereas Richard Branson points out in Screw Business As Usual every living thing and the planet itself are stakeholders.
Sadly, rather than being in the lead, the majority of US corporations are staying focused on short-term results and narrow definition of stakeholder.
But the winners in the future will be those companies, large or small, whose thinking is longest and definition is broadest.
I hope you are one of them.
~~~~~~~~~~~~~~~~~~~~~~~~~~
Kung Hei Fat Choy (Wishing you an abundance of wealth and prosperity!) Happy Year of the Dragon
A Friday series exploring Startups and the people who make them go. Read allIf the Shoe Fits posts here
I met an interesting guy over the holiday.
“Chris” has a small startup in the financial services sector and is starting to gain traction.
He said it’s been an uphill battle and that he wishes he had spent the same energy doing something “socially responsible,” because it would be a lot more satisfying.
I’ve heard similar comments from other entrepreneurs and small biz owners.
Happily, this is one of those times it is possible to “have it all,” because all it takes is changing the way you look at the world.
Having a socially responsible business doesn’t require a focus on solving social ills and it certainly doesn’t mean forgoing profit—without profit your business won’t be around.
It does mean running your business in a responsible manner
pricing fairly, passing on savings whenever possible and never gouging
fair wages and other compensation
fair employee treatment (not playing favorites, etc.)
reducing your carbon footprint
community involvement and contributing whenever possible; and
None of this is rocket science and all of it makes good, profitable, business sense.
In fact, Chris and others who feel the pull to help fix the world would do well to read Richard Branson’s Screw Business As Usual to see how others are ‘doing well by doing good’.
Note: the unseen pause is between ‘screw’ and ‘business’, not between ‘business’ and ‘as’,
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Warning.
Do not attempt to use Option Sanity™ without a strong commitment to business planning, financial controls, honesty, ethics, and “doing the right thing.” Use only as directed.
Users of Option Sanity may experience sudden increases in team cohesion and worker satisfaction. In cases where team productivity, retention and company success is greater than typical, expect media interest and invitations as keynote speaker.
It’s not often that I unequivocally recommend a book, but Richard Branson’s Screw Business As Usual meets all my criteria.
It’s not a do-gooder book, per se, although Branson is passionate about “doing good by doing right.”
I realize that his take on entrepreneurism will fall on deaf ears for anybody who starts a company with the prime motivation of getting rich, but even they might reconsider after reading it—Branson started Virgin so he could afford to make a difference.
And there is prime proof that doing right pays.
“Companies that consistently manage and measure their responsible business activities outperformed their FTSE 350* peers on total shareholder return in seven out of the last eight years.”
Branson believes that the right focus is your employees and your customers; take care of them and the rest will follow.
The people, stories and advice in Screw Business As Usual are about, and dedicated to, entrepreneurs, business people and anybody else who believe that there is more to work and business in the 21st century than making money.
What worked in the past isn’t going to work in the future, from top-down, command and control management to companies whose policies destroy people, resources, etc., in the name of profit.
The doing-good-by-doing-right bandwagon is picking up steam, fueled by a vocal new generation that is disgusted with business as usual and older generations (maybe not as noisy) with the same feelings who are learning to vote with their feet—as US banks so recently found out.
Business needs to recognize that if they want to keep making money they need to do it responsibly—assuming, of course, they need both workers and customers to succeed.
In other words, screw business as usual.
*FTSE 350 is the British version of the Fortune 500.
Entrepreneurs: Screw Business As Usual (book review)
I rarely read book that I unequivocally recommend, but Screw Business As Usual meets my criteria.
It’s not a do-gooder book, per se, although Branson is passionate about “doing good by doing right.”
I realize that his take on entrepreneurism will fall on deaf ears for anybody who starts a company with the prime motivation of getting rich, but even they might reconsider after reading it.
And there is prime proof that doing right pays.
“Companies that consistently manage and measure their responsible business activities outperformed their FTSE 350* peers on total shareholder return in seven out of the last eight years.”
Branson believes that the right focus is your employees and your customers; take care of them and the rest will follow.
The people, stories and advice in Screw Business As Usual are about, and dedicated to, entrepreneurs, business people and anybody else who believe that there is more to work and business in the 21st century than making money.
What worked in the past isn’t going to work in the future, from top-down, command and control management to companies whose policies destroy people, resources, etc., in the name of profit.
The doing-good-by-doing-right bandwagon is picking up steam, fueled by a vocal new generation that is disgusted with business as usual and older generations (maybe not as noisy) with the same feelings who vote with their feet as US banks so recently found out.
Business needs to recognize that if they want to keep making money they need to do it responsibly—assuming, of course, they need both workers and customers to succeed.
*FTSE 350 is the British version of the Fortune 500.
A Friday series exploring Startups and the people who make them go. Read allIf the Shoe Fits posts here
Have you ever had something you were aware jump up and hit you in the face? It’s not new information and your reaction is the same, but the impact is enormous?
That is what’s happening to me as I read Richard Branson’s Screw Business As Usual (I’ll be reviewing it next Thursday, December 22)
Maybe it’s just the entrepreneurs Branson talks about, but their goals seem so different from the entrepreneurs in the US.
The “already done it”entrepreneurs in Branson’s book grew up, as did Branson, with an eye to improving the world and knowing that they needed to a financial base from which to do it, but they never lost track of their main goal.
The current entrepreneurs he describes, many of them young, have a keen focus on creating jobs and improving their communities and see their company as a way to accomplish that.
They buy whole-heartedly into Branson’s basic idea for running Virgin, i.e., doing good is good for business.
Whereas a large segment of US entrepreneurs, especially the younger ones, seem to see their startups as the fastest way to get rich since the financial, consulting and legal sector jobs dried up.
Obviously, not all of them, but a significant number.
“Doing well by doing good” just isn’t mainstream in the US.
Or is it?
Where do you fit?
Option Sanity™ helps equity do the right thing for all your stakeholders.
Come visit Option Sanity for an easy-to-understand, simple-to-implement stock process. It’s so easy a CEO can do it.
Warning.
Do not attempt to use Option Sanity™ without a strong commitment to business planning, financial controls, honesty, ethics, and “doing the right thing.” Use only as directed.
Users of Option Sanity may experience sudden increases in team cohesion and worker satisfaction. In cases where team productivity, retention and company success is greater than typical, expect media interest and invitations as keynote speaker.
Everywhere you turn these days you see ‘entrepreneurs’, whether it’s the kid on the corner with a lemonade stand, the owner of the new cupcake shop or Mark Zuckerberg—they are all entrepreneurs.
Entrepreneurs aren’t a new phenomenon, some five centuries ago Niccolo Machiavelli offered a definition that still holds true, “Entrepreneurs are simply those who understand that there is little difference between obstacle and opportunity and are able to turn both to their advantage.”
Victoria Claflin Woodhull put it a bit differently, “Entrepreneurs are risk takers, willing to roll the dice with their money or reputations on the line in support of an idea or enterprise.”
Roy Ash offers a shorter, pithier description, “An entrepreneur tends to bite off a little more than he can chew hoping he’ll quickly learn how to chew it.”
Ted Turner, a successful entrepreneur himself, offers a slightly cynical take on the current love affair with entrepreneurs, “My son is now an “entrepreneur.” That’s what you’re called when you don’t have a job.”
Pete du Pont points out something of which many people aren’t aware, i.e., the entrepreneurial path is rarely straight line, “That’s the way it is with entrepreneurial people. You try one thing, it doesn’t work, you try another.”
Nolan Bushnell doesn’t mince words in stating the most important entrepreneurial trait, “The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.”
Most people enjoy stories about accidental entrepreneurs, but few realize that Richard Branson is one of them, “I wanted to be an editor or a journalist, I wasn’t really interested in being an entrepreneur, but I soon found I had to become an entrepreneur in order to keep my magazine going.”
That’s all for today; be sure to join me tomorrow to hear about a universal truth that might surprise you.
Entrepreneurs face difficulties that are hard for most people to imagine, let alone understand. You can find anonymous help and connections that do understand at 7 cups of tea.
Crises never end.
$10 really does make a difference and you’ll never miss it,
As Sharlyn Lauby, our 
A McKinsey study on the 
Everywhere you turn these days you see ‘entrepreneurs’, whether it’s the kid on the corner with a lemonade stand, the owner of the new cupcake shop or Mark Zuckerberg—they are all entrepreneurs.
