Last week I again attended the AlwaysOn 2010 Summit at Stanford, held at Stanford University in California. It was a beautiful setting with people from all parts of the technology ecosystem—from very large companies such as Hewlett Packard to small 2 person startups, banks, venture capitalists, angel investors and consultants.
One of the most interesting takeaways from the conference was the very different views that people had on how the venture capital industry was developing in the present environment. On the one hand, there were strong assertions that the VC industry was in good health and that there was a lot of money looking for investment. Most of the VCs I encountered asserted that they were very much interested in early stage investments and that they provided a unique service to founders and early stage management.
However, this was in stark contrast to the intense frustration many startups were expressing when describing their hunt for capital. They felt that VCs were far from interested in early stage investments and were mostly focused on follow-on investments in portfolio companies or syndicated deals. Some (probably about 70% of the people with whom I spoke), who had received investments felt that the VCs were often a distraction on the Board and either were micromanaging or otherwise not helpful. Yet these founders and executives have little choice but to continue to seek venture money to fund their growth.
Could these developments be due to the fact that many of those running the largest firms are no longer the seasoned operating managers that brought forth the storied companies of old, like Apple, Cisco, Fairchild Semiconductor, Silicon Graphics, etc.? Many have the impression that the generation of VCs that joined when the names on the door wanted to kick back are simply bankers; portfolio managers unable to take risk or understand a vision.
The industry has always been prone to “herd mentality,” where a lot of VC firms invest in similar startups; as was blatantly obvious during the dot com debacle.
A preference for financial manipulation and unwillingness to take risks combined with a lack of operating experience and little vision could signal a death knell for the kind of leaps that created high tech in the first place.
The upside is found in younger VCs and angels; men and women who founded or worked in startups and are putting their money where their mouth is to help create the next wave.
The question is there enough of them or will it be a case of too little too late?
Normally Saturday is all about multiple links to useful information, but today I have something even more useful.
Every year KG Charles-Harris, EMANIO CEO and founder of M3, attends the Stanford Summit; this is the second year I’ve asked him to share what he learned with you.
I specifically asked that he provide a look at how this premier Silicon Valley gathering saw their role in the coming economic recovery.
As usual, the AlwaysOn Stanford Summit was a breath of fresh air with industry luminaries, entrepreneurs and venture capitalists interacting intensely. The topic on everyone’s minds was, of course, the Grand Recession that the financial industry had brought upon all of us and what would bring us out of it.
One issue was clear in everyone’s minds and that was that the information and computer industries were some of the leading forces that would turn the negative situation into more positive territories. From my point of view as CEO of a software company and leader of a foundation that works with disadvantaged kids, it is clear that innovation and problem solving will be a core factor to bring the US, and the rest of the world, out of recession.
Technology is a two-edged sword and information technology helped create some of the problems.
The efficiency with which trades are executed in the financial markets;
the ability to seamlessly package, re-package and syndicate debt; and
the borderless nature of global finance is all based on computer technology.
As such, tech was a facilitator, not only in the creation of the bubble, but also the in the speed with which it spread from mortgage backed securities to the rest of the economy.
One way or another most people are experiencing the fallout on a global level.
In the same way, it will be due to the possibilities and flexibility of technology that the world will ascend out of “darkness”.
But facilitators are neutral and play both sides, so just as the downturn and bubble were helped along by technology, so the turnaround will happen with the help of technology.
This is what many of us discussed at the AlwaysOn Stanford Summit and I would like to share with you the varied thoughts of three entrepreneurs, Lorenzo Carver, CEO of Liquid Scenarios, Jason Seed, CEO of CVSdude and Renee Blodgett, CEO of Blodgett Communications, on how technology will aid the recovery.
In essence, these three have different takes on the value that technology brings and why tech will facilitate the turnaround.
The first CEO I interviewed was Lorenzo Carver, who has extensive experience in the technology, finance and accounting industries, among others. He has founded several companies, as well as having participated in raising billions of dollars in funding for other companies. He is often sought for his strategic advice by both company leaders and venture capitalists.
At present, his major endeavor is Liquid Scenarios, which minimizes uncertainty for investors in different ventures. They provide the various hardcore financial scenarios that an investor needs to calculate—investment amounts, rounds of financing, time to exit, etc.; the different aspects of modeling the future of an investment beyond what spreadsheets can take you. They have major venture capitalists and other investors as clients.
Lorenzo’s comments on how technology would play a part in the economic recovery were quite insightful. “Tech has already had an effect on the recovery, just like it had in the downturn at the end of the dotcom era. In fact, tech has led us out of the doom and gloom mentality with earnings from Google, Adobe and others being significantly better than expected. This has provided people with hope that organizations are continuing to invest. These are important signals, considering the leadership position that the technology industry has in this country.”
I agree with what he is saying, however, I remain a bit skeptical of the significant optimism that exists in the market today. Considering the significant job losses and the continuing trend of more jobs lost, in addition to the continued credit freeze for both consumers and corporations, it is difficult to imagine that we are as close to a recovery as people believe. A slowing downward trend is not the same as an upward trend.
When I asked Lorenzo about this, he said “Of course, as a business leader I am planning for continued hard times and am finding ways of doing more with less; I believe that this will continue for some time.”
In short, technology has played and will continue to play a significant role, but we are still experiencing a downward trend.
Everyone I spoke with at the Stanford Summit recognizes this and manages accordingly. In this environment it is all about cash management and to the extent technology can aid in this it will continue to be a winner.
Last year I met Guy Marion, Executive Vice President of CVSDude, an enterprising and innovative version control platform, who had traveled all the way from Australia to attend the Summit. CVSDude is the leading worldwide provider of Subversion hosting and developer solutions to distributed teams.
This year I had the pleasure of sitting down with their CEO Jason Seed, who, over this past year, has driven significant progress, including opening offices in Silicon Valley. When asked about how the tech industry is/would contributing to the economic recovery, he was very clear on the major factor technology brings.
“The major benefit of the technology industry is the efficiency it delivers to all organizations. Clearly both efficiency and effectiveness will be the major drivers of an eventual recovery.” Clearly Jason is correct in mentioning this. Since the inception of technology, efficiency and effectiveness have been the drivers of innovation. Clearly, what we are now seeing in the economy is a retrenchment started by finance, but continued by the search for efficiencies and doing things more effectively using technology.
Many of the people laid off in this recession will have their jobs replaced by technology. They and many more will find that to regain employment some level of retraining will be necessary. This is certainly true for many in Detroit, the epicenter of employment losses.
Jason’s company focuses on delivering these efficiencies to global teams of developers, whether they are distributed across large geographic areas or who work in the same office. Regardless, being able to have scalable, reliable, secure systems to manage version control and other software issues is a core enabler of effective development.
Finally, I discuss the role that technology will play in the economic recovery with Rene Blodgett, CEO of Blodgett Communications. I kidded Rene that maybe she was the sister or wife of Henry Blodget, the infamous dotcom stock market analyst from Merrill Lynch. In fact, she’s not related in any way to “Hype” Blodget, despite her involvement in promoting technology companies.
Blodgett Communications partners with clients, getting to know their business in an intimate fashion, in order to differentiate and create thought leadership. Their core expertise focuses on the absolute fact that revenue and sales are always at the forefront of each management team’s objectives, so they develop media strategies that minimize cash outlay while enhancing cash generation.
Rene believes the way technology will lead us out of the recession is through enabling better decision-making. She says, “It is clear that technology enables analysis of data and acquisition of information in a way that gives companies the tools to understand options and reach conclusions in ways that were previously impossible. This is especially true about business intelligence and predictive analytics; companies, like EMANIO, will be at the forefront.”
Thank you, Rene. It is absolutely true that EMANIO is at the forefront of the information and analysis revolution and I am in complete agreement when you say, “It is only through improved decision-making that we will be able to get the economy on an even keel again.”
To summarize,
Lorenzo believes that tech is already leading us out of the recession and that the “green shoots” that we are seeing are due to the performance of technology in companies or technology stocks’ effect on general sentiment.
Jason believes that effectiveness and efficiencies driven by technology will lie at the base of a robust recovery.
Rene’s conviction is that it is better decisions enabled by technology that will differentiate winners from losers and lead us out of the doldrums.
All our sentiments are valid and interesting, but we’ll have to see how it develops going forward before we can judge how accurate we are.
The Stanford Summitis exciting; a marvelous opportunity to catch up with people you know and to make new contacts. Obviously, the economy was a major topic of conversation.
Lorenzo Carver, CEO of Liquid Scenarios, and I sat down for a conversation regarding the positive and negative experience we have both had bootstrapping our companies during the past few years.
We both, after extensive experience sitting on the venture capital, investment banking and entrepreneurial sides of the table, chose to bootstrap our companies through product development and product launch.
I first met Lorenzo at last year’s AlwaysOn Stanford Summit and met him again at this year’s Summit. It was a pleasure seeing him again as we have both moved forward strongly during the difficult economic environment. Lorenzo has had a varied career advising companies, developing strategy and assisting in raising capital. He has raised several billion dollars for his and other’s ventures during his career.
Also my ventures, EMANIO and the M3 Foundation, have developed well during the recession despite strict fiscal discipline. Or maybe thanks to it.
As I spoke with Lorenzo, he mentioned that bootstrapping is “a double edged sword; companies that are bootstrapped need to have customers and serve customers in order to survive”.
In other words, the order of business for bootstrapped companies is business. Making money is the order of the game. In contrast to VC funded companies, bootstrapped companies quickly have to find their way to revenue and profits. All investment in product or market development is coming from revenue and profits, so acquiring these are the core responsibilities of the CEO and the rest of the management team.
Lorenzo continued, “Companies that have financing when things get tough have more options, but often lack the strong teams and lack control in how to keep the team together when things get tough”. In other words, the act of bootstrapping builds a certain discipline in a team. Everyone is aware of the fact that their livelihoods are dependent on getting that revenue and profit. Costs have to be kept low and sales have to get done.
Well financed companies most often lack that discipline and there is tremendous waste in a lot of VC funded companies. However, they also are able to do more and grab opportunities that bootstrapped companies are unable to act upon because of a lack of resources or the need to stay profitable.
We were both in agreement with the fact that everyone we had worked with was in a similar situation to the one we found ourselves in. The business environment turned toxic overnight and fourth quarter last year and first quarter this year were horrendous for everyone we had spoken to, including partners and customers.
There is no question that there will be more bootstrapping as companies are having difficulty finding investment capital or lenders. This, in turn, will bring greater scrutiny of budgets and purchase orders across the spectrum. We both believe, though Lorenzo is more optimistic than I am, that bankruptcies will continue to grow and that the business environment will continue to be difficult for years to come.
However, there are few times better to grow a company than during difficult times. Many of the great companies of today were started during difficult economic environments, had difficulty finding capital and had to find innovative ways of growing. This developed their corporate cultures to be strong and focused toward creating great value propositions with scant resources.
To any budding entrepreneurs out there, this is the time to truly consider your dreams and take the step.
Although there are many things George Gilder has said with which I vehemently disagree, his thoughts and comments on innovation are definitely worth listening to.
Want to see and hear more of what went on at Stanford Summit?Click here
How real is green biz? We read about it all the time. Pundits debate the talk vs. the walk; CEOs worry about the “carbox” effect; and investors try to understand the impact.
Google “green business” and you get over 3 million hits and green was the primary subject at the Davos World Economic Forum this year.
“No doubt green is a central theme in Davos this year, where more than 2,500 participants from 88 countries are meeting to discuss key global issues. Some 20 sessions —many of them private—are dedicated to environmental issues. … “Evolution is not a response,” cautions Simon Mulcahy, head of information technology industries at the World Economic Forum. “Big behavioral changes need to happen now and technology is a fundamental game-changer.”
Green tech, also called clean tech, was a major subject at the Stanford Summit, too, and its increasing visibility and potential is taking a significant chunk of dollars invested.
How good will the returns be? Emanio CEO KG Charles-Harris, who attended the Summit for me, has a personal slant on the subject.
“When I co-founded HURD (the private investment vehicle of Norway’s Fred. Olsen family in alternative technologies) in Scandinavia in 1996, this was an unusual area to invest in.
Our strategy was to focus on what we perceived to become major constraints in the coming decades; clean air, clean water, cheap renewable energy and cheap protein.
Most people we interacted with, especially in the US, were incredulous that this was something we believed would provide a strong ROI. We persisted in our strategic focus and during the years I was there we had an IRR of more than a thousand percent each year.
At the time it was a well kept secret. Now, however, investing in clean tech and renewable energy is becoming so mainstream that the days of unusually high returns are over.”
Are they? As green tech goes mainstream and the market matures will the returns remain significant?
If not, will the innovators and their backers walk away from the problems?
My second day here at the Stanford Summit confirmed my initial impressions from the cocktail party last Thursday. I have found that the age trend I noted in my earlier post has strengthened after interacting with a much larger cross section of attendees.
The cocktail party last week was for the AO 250, i.e., the companies selected as the 250 hottest emerging technology companies in the world for 2008.
At the conference I interacted with CEOs and venture capitalists from about 700 companies—a significant number of them with graying hair, confirming my initial impression.
After a day filled with excellent presentations and speakers and then chatting with various participants during the evening reception, I was truly impressed by the savvy and innovative ideas being brought to life by the “old timers.”
One of the most fascinating is Wyndstorm, lead by 54 year Marian Sabety. That very innovative technology companies are founded and led by women is an anomaly. That the woman is mature is even more unusual.
In Wyndstorm’s case, Marian is a long time innovator who has brought to the market a solution to the web advertising crisis.
Understanding that at the present moment only 7% of advertising budgets are spent online, advertising agencies and corporate chieftains are desperately searching for proven solutions that reach core and targeted audiences in an interactive environment.
Wyndstorm’s social frames pull targeted customers from other sites they frequent directly into an interactive, virtual place where the marketer controls the content, reinforcing image, brand and messaging on a one to one, razor targeted basis. Very impressive.
I believe that the graying of the executive suite in startups has everything to do with the need for execution, reliability and monetization in addition to innovation of technology. Companies need people who are not new to the game to succeed in this market.
Younger people may have many ideas, but they lack the experience to execute in a manner that allows ideas to be monetized rapidly in a variety of economic situations and enables the industry to execute from a strategic perspective.
Thinking about it, even the Google guys needed to bring in seasoned executives to grow the company from an idea to industry power player.
In attending the AO 250 cocktail party last night, I was struck by something that differed significantly from the first ones I attended after moving to the US and getting involved with Garage Technology Ventures. Guy Kawasaki was a powerful force (he still is), as were the exuberance of youth in driving new technology and investment dollars.
This time around the surroundings were less lavish, as could be expected since we have all learned that spending money is not the same thing as making money. However, a significant difference was also the graying of the participants at the party.
Other than many of the people working at AlwaysOn (the conference co-host), most of the participants were over 35 years of age. Gone were the 22 year old CEOs that were the mainstay of the late 1990s and early 2000s. Now, the CEOs and management teams seemed seasoned and focused on clear drivers of value creation.
Not that I have anything against young CEOs; today they are creating significant value for investors—Facebook is just one example. However, the management teams are different today in that they are very business savvy, rather than having lofty concepts, ideals or delusions about how to create value.
Now, perhaps it is my perspective that has changed.  I’m 10 years older than the last time I participated in events like this and during that time I have been active in the investment banking, entrepreneur and venture capital arena in Europe and the US and consequently have matured slightly. At present, I’m running my fourth startup; Emanio is actually a restart from a European company I co-founded and brought from Scandinavia to the US in 2000.
Along the way I’ve learned a few lessons, especially during the past 5 years during which I not only raised money, but also did acquisitions in a difficult market. Doing this while bootstrapping the company (building it up without any outside investors) has taught me these lessons through considerable pain. Bootstrapping is definitely not for the faint of heart—everything takes longer and is more difficult than when one is well funded—but it does force one to possess a certain discipline.
Having become one myself, it warmed my heart to interact with all these entrepreneurs, as well as with Tony Perkins, Marc Sternberg and the others at AlwaysOn, and sharing in their stories. It was truly inspirational.
I was unable to attend the Stanford Summit this year, so I prevailed on Emanio CEO and M3 Foundation founder KG Charles-Harris to go and share a story or two about the people he met.
From KG:
At the Stanford Summit I met a Lorenzo Carver, who impressed me quite a bit. He’s 40 years old, plays base and studied music at Berkeley as a film score major. His working to pay for school was affecting his playing and studies and as a consequence he started a business that did well and sold it after 18 months, then started another one that tanked.
Lorenzo’s entrepreneurial zeal didn’t end and when he returned to school to study finance he put together a leveraged buyout for a company in bankruptcy and used his portion of the profits to pay for graduate school. He ended up with a MS in Accounting, plus and MBA and CPA; all received while he was working.
During those times Arthur Andersen was the premier firm, but after a short stint there Lorenzo wanted to return to his entrepreneurial roots. His new business was advising entrepreneurs; he wrote more than 200 strategic plans for biotech and software and assisted in raising more than a billion dollars in funding for these companies.
Then came the dotcom collapse, which gave him the seeds for his present company, Liquid Scenarios. They are now 14 people and self funded, growing from the profits they produce. The strange thing is that, instead of coming to the conference to seek investors, he came seeking investors as customers. (Liquid Scenarios’ tagline— “Because Time is Money”)
Liquid Scenarios is based on his having developed complex algorithms for calculating funding scenarios, especially for high-growth companies.
Anyone who has spent time calculating scenarios for more than one class of stock realizes the value of this tool for real estate, venture capital, private equity, and private investors.
The problem he solves is one that faces many investors (and entrepreneurs) in disparate industries—how to calculate funding structures that reduce uncertainty.
Previously there has been no simple-to-use software that helps reduce uncertainty for investors, entrepreneurs and creditors in financing situation by enabling modeling of complex scenarios and outcomes.
After reviewing his software, it is clear that it reduces the calculations from dozens of hours and days to just a few minutes.
(Pretty cool! Check out the product demo to really understand why this is so hot. Miki)
The reason I’m excited is because I’ve been on all sides of the table, as a venture capitalist or private equity investor, investment banker and entrepreneur and I know that calculating all this is so tedious and difficult that only experts can do it.
Liquid Scenario’s tool creates equality between the people on different sides of the table and is especially useful to entrepreneurs who may not have the training to work complex spreadsheets.
But what I found most interesting was Lorenzo’s comment on the most important lesson he’s learned as a manager or entrepreneur.
“This startup is the easiest one I’ve done of twelve where half were started by me. The difference this time is that I’ve been exceedingly careful about the people I work with—I’ve only chosen the ones that are passionate and competent. There is no B-team this time.”
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,
Last week I again attended the AlwaysOn 2010 Summit at Stanford, held at Stanford University in California. It was a beautiful setting with people from all parts of the technology ecosystem—from very large companies such as Hewlett Packard to small 2 person startups, banks, venture capitalists, angel investors and consultants.
The 
Then came the dotcom collapse, which gave him the seeds for his present company, 
