Tag Archives for Silicon Valley

Booming or Busting?

A view of downtown San Jose, the self-proclaim...Image via Wikipedia

Very strange reading the papers in the UK and hearing news from the USA about budget cuts and contrasting it with the talk by Paul Graham at the Y Combinator Startup School 2010.

Graham’s talk is all about lots of clever money seeing the quick returns on startups in Silicon Valley and wanting some of the action.  The angels are forming Super Angel groups and the VCs are prepared to invest smaller amounts for first rounds of £300k.  The valuations are going up and up so it is a good time to raise funds providing, as always, you make great progress and can justify a higher valuation at the next round.  Lack of progress can lead to a lower valuation and a dreaded downround or no round.

Ignore the gloom about budgets and get out and start a great company.  But whatever funds you are offered, use a great business plan resource and keep exceeding the targets.  Graham pointed out the recent effect of small startups funded by angels being bought up early giving returns of 10x to angels in one year.  As returns have to be related to time, these 10x returns in one year are way ahead of the returns angels received in even Google where they had to wait five years.

Are you Booming or Busting?

But take great care as ever!

PS Do listen to Ron Conway et al talking at Startup School.

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Let the good times roll again! Convertible debt for angels

Fred WilsonImage via Wikipedia

Fred Wilson write a great blog and not much needs to be added to it except that he is one person who got in early and will make a ton of money out of spotting the social network space.  Amazing to have the simple vision to use the tools and then be able to relate to entrepreneurs.  All so simple but he does hide away..  Ooops no he does not as one of his companies, Zemanta, has just popped his photo up!

In his post on convertible debt for angels in the first round, he puts the other case that he prefers agreeing a price and investing.  But he understates the great increase in value he brings to the new company when he says “I can negotiate a fair price with an entrepreneur in five minutes and have done that for a seed/angel round many times.”  We can all agree a price but most entrepreneurs do not bite off our hands!

Fred Wilson operates in a very different environment than Cambridge Enterprise, the arm of the University of Cambridge which “exists to help University of Cambridge inventors, innovators and entrepreneurs make their ideas and concepts more commercially successful for the benefit of society, UK economy, the inventors and the University“.   Their recent News and Events Bulletin states that “Sixteen Cambridge Enterprise portfolio companies are included in Business Weekly’s “Killer 50” list of the most disruptive technology companies in the East of England”.  Amazing companies that will change our lives in the years to come.

But in the mission statement of Cambridge Enterprise there is no mention of angel investors.  Are angels the best investors to start disruptive technology companies?  Do they have deep enough pockets?

Perhaps angels in Cambridge need to entice the entrepreneurs in Cambridge to follow the path of Fred Wilson as demonstrated so well by Rahul Vohra and Rapportive.  A very different business plan resource approach is required.  Perhaps Cambridge Enterprise should establish a new division to support the likes of Rahul Vohra – after all the experience, skills and opportunities given to Rahul Vohra served him well until he upped and offed to Silicon Valley.

The only worry to me as a low-grade angel is that the convertible debt stacks the cards too much in the favour of the entrepreneur and the second round investors.  The first round investors need a great big uplift to justify the huge risk we take.  We might not fund a company to revenue but we fund social network companies to their first major step of customer engagement with hundreds of thousands of users.

Will all this help The Entrepreneurs Graphic Novel when it is is published as an app?

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Will Rapportive change the Cambridge Cluster?

Image representing Rapportive as depicted in C...Image via CrunchBase

Great news that Rahul Vohra and his third venture, Rapportive, has gone viral with over 100,000 downloads.  Click here for the full story on Rapportive.  Briefly Rahul opted out of his PhD, helped start www.mo.jo, joined the start-ups at Redgate Software and toyed with a game based on a book and then came Rapportive.  Rahul left Cambridge to join Y Combinator and tap into the Silicon Valley scene.

Y Combinator invests an average of $17,000 in each start up – now over 280 companies – for around 10% of the equity.  Then Rapportive raised some $1 million from Silicon Valley angels.  I asked Rahul if he had given any of his early backers in Cambridge, UK, a chance to invest and he replied on Facebook “Rahul Vohra Philip: yup, there are investors from Cambridge. Neil Davidson, John Taysom, and one other who prefers to remain anonymous :)”.

Redgate appears to have a policy to go for growth and show that you can build a major technology company without offering equity to employees except a tightly controlled scheme.  If founder Neil Davidson sees Rahul grow fast, will this change his view?  Particularly if he sees them then grow new companies with their “winnings”.  As Redgate plays a major part in the Cambridge Cluster, including providing the chair of Cambridge Network, this could have a major impact on the Cambridge Cluster.

Silicon Valley keeps ringing the changes.  First companies were sold that made a profit, then the social network companies were sold which made no profits but had millions of users and now people are buying teams of geeks.  An example is Motorola buying 280 North for the geek team.  Up 280 is another success from the Y Combinator stable.  Up 280 raised less than Rapportive with a reported $250,000 in a 2008 angel round.  Interesting to try to guess at the final equity ownership.  The Equity Fingerprint was: two founders, then Y Combinator, an angel round and hopefully options for the team.

Guesstimates:

Round 1: Start -up:

Two founders – 50% each;

Round 2: Y Combinator arrives:

Two founders – 45% each, Y Combinator 10%

Rounds 3: Angels invest $250,000 and say 10% option pool:

Round 4: Two founders –  22.5% each, Y Combinator 5%, angels 40% and 10% option pool.

Guess that Y Combinator and angels would be paid out on completion with the founders and option pool vesting over a couple of years.  But a great deal for the geeks.  Congratulations.  Not as good as Xensource in Cambridge, UK, but not bad!

The world keeps spinning; will Rapportive make the Cambridge Cluster spin faster?  Will Rahul return to Cambridge with his winnings and tell us all about his business plan resource, become an angel and a serial entrepreneur?  How long will we have to wait?  The clock is ticking……..

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Playfish leaps up The Cloud with VC power

LONDON - MAY 31: Party revellers enjoy the atm...Image by Getty Images via Daylife

The Scobleizer uses his Flip video to great effect in these two videos:

“Playfish’s CEO talking about how they are building games for Facebook, part I and part II.”

Playfish builds social games (20million monthly players) and was formed by people who had already built a games business in the old game world and now are building games on social network sites such as Facebook.  The videos show how the games uses the social network, how they get tens of thousands of feedback, how a game can quickly be upgraded (a hundred upgrades not possible on a DVD), how the have no servers and everthing is in The Cloud.

Another company building on Facebook’s platform and reacting to the demographic data already available.

Playfish has raised $20million from Accel and Index Ventures and has quickly developed a 24 hour development operation with offices in London (HQ), Beijing and Silicon Valley.  Of course the founders of Playfish had done it before and so would have got a good deal from the ever generous VCs.  The real lesson is to build a business and sell it and do it again and again.

Building a business in The Cloud with VC power seems a great way to swim, lots of air and lots of water drops to power the fish along. I wonder what business plan resource they used?

Form thePlayfish website:

“What are Social Games?

 

Social games are games designed to be played together with friends.

Traditional computer games focus on standalone game play on consoles, your PC or on your mobile. Games that do allow you to play together with others online normally require you to buy the game, go online and try and find like-minded new friends who are also playing the game. This is something that usually only the most dedicated gamers are prepared to do.

Our social games are different. We create games that let you play together with real-world friends and family using the infrastructure built by social networks. This is in some ways a return to the roots of games. You play with the same people you would play cards, board games or go bowling with in the real world. Sharing the game experience with friends makes it more compelling and fun.

At Playfish we believe social games are a big part of the future of the video games industry, and are working hard to be the leading company in this emerging sector.”

 

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Friends of Facebook founder

Mark Zuckerberg f8 Keynote - Dave MorinImage by b_d_solis via FlickrIn the Telegraph Magazine of 19 July 2008, there is an interesting article on Facebook founder, Mark Zuckerberg, detailing (again) how he has fallen out with college friends and others on the way to building Facebook.  It ends with a comment from Kara Swisher. a columnist on the Wall Street Journal “….The number of people he’s had problems with at a young age is remarkable- not in a good way.”.  I bet he would not have had the problems if he had not been so successful; in a variation of the old saying “Money keeps you in touch with your friends”.  As Reid “Glug” Hoffman said on his flying visit to Cambridge, it is easy to have the idea but so difficult to make it fly, something Facebook has certainly done.  Besides lots of different groups of people from pop stars to footballers who get very rich very quickly find life difficult, both family and professional so why should geeks by different.  ConnectU still only boasts 15,000 members at 200 colleges/universities.

The article gives some figueres of interest to Equity Fingerprint, the business plan resource, but omit any reference to an angel round in which Reid “Glug” Hoffman claimed to be an investor.  But now Facebook is registered in Delaware so it is difficult extract information unlike Companies House in the UK.  The details from the article show the normal chopping and changing of ownship in start-ups as people come and go and others do not stay close, very close to the action.

  1. Zuckerberg and his Harvard room-mate,  Saverin agree to invest$1,000 with ownership 2/3 to 1/3
  2. With the site taking off, ownership is now Z 65%; Saverin 30% and Moskovitz (around 13 April 2003?)
  3. Z moves to Silicon Valley and Saverin stays in New York (“That decision would prove ill-judged) – summer 2004
  4. Z meets Parker who co-founded Napster at age 20yrs
  5. Z attends meeting with Sequoia Capital in his pyjamas and turns down offer of investment
  6. In July 2004, Z claims that Savarin never matched an agreed investment of $20,000 in seed money and et al.  Z transfers all IP and membership interests to a new versin of the company in Delaware.  “The value of Savarin’s stock was unhinged from any further growth of Facebook, and Savarin was expunged as an employee”.
  7. Parker leaves
  8. In spring of 2005, a VC(who?) invested $12.7million in Facebook and users amounted to 5.5million
  9. Microsoft invest $240million, valuing Facebook at $15billion.

I think that the parties have made settlements recently.  When Google floated, lots of “friends” and “consultants” appeared out of the woodwork and were appeased with stock.

I do not the details but I do know that if you have a good idea, you quickly find friends who want a stake for no effort and no risk.  But it was never easy.

I wish that I had had a free ride with Facebook and Google!

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Options are an entrepreneurs best friends

HQ of AMD in Sunnyvale, CA, USA.Image via WikipediaSerial entrepreneur, Steve Ives, is up and running again with taptu.com which is a search engine for mobile phones.  His previous backers, 3i and Sofinnova, stumped up $10million dollars and he has already built a team of thirty people.

In Jenny Chapman’s article in the Cambridge Evening News, Steve Ives gives little away but does say that “everyone involved has share options, so everyone involved has a good chance of making a nice pile of cash”.  At least someone in the Cambrige Cluster has learnt from Silicon Valley.

But like Bill Gates, Steve Ives suffers from paranoia.  “it is a good state of mind to be insecure about your position in the market and to always be looking at ways to improve, and always looking at the adverse scenario”.

Taptu.com is in beta at present.

Steve Ives sold Trigenix to Qualcomm for $40million in 2004, after just four years, so if you want to join the option winnes, get in quick!

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Geneva generates funds to re-found college

Painting of the Hall of Christ ChurchImage via WikipediaThe founders of Geneva Technology, Ros and Steve Edwards, have donated £30million to re-found New College, Cambridge.  It is to be renamed after the Edwards’ and its founder, the late Same Rosemary Murray, with the grand title of Murray Edwards College.  Interestingly, Ros was not a founder of Geneva but joined later and caught the eye of one of the founders, Steve.  The other founder took an early bath and insisted on being bought out of this risky adventure called Geneva for what was in the end a modest sum.  However it gave the Edwards’ great stress as they had to fund the buyout.  The Edwards’ then enticed the late, great Stephen Thomas to join them to power Geneva to a great sell out.

One of the key people of the Cambridge Cluster, Herman Hauser, is donating some £7million to establish an enterprise centre.  News from the “other place, is that Michael Moritz, top VC with Sequoia Capital, has given £25million to Christ Church College.

All these donations come from individuals and perhaps Cambridge Enterprise and others will see the benefit of promoting enterprise in the cluster in an open way.  In the early days, no one would have thought that one let alone these three would have been so successful and so generous.

Geneva Technology makes a great Equity Fingerprint, the business plan resource.

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Executive part-time MBA at Cambridge

The MBA students ARU benefit from post-experience management development in the following ways:-

  • Developing confidence to deal with issues across the range of management disciplines;
  • Identifying and evaluating external influences and relating them to necessary changes in your organisation;
  • Taking a balanced view of business issues in order to formulate and implement realistic strategies;
  • Enhancing strategic management skills and capabilities;
  • Enabling students to challenge conventional ideas and explore innovations in business and management processes;
  • Developing transferable skills necessary for successful management development.

Soon be providing the skills to match Silicon Valley.

What a pair! Scoble and Loic go head to head

Both have video shows so check out Scoble’s 14 shows  and Loic’s new venture Seesmic.

The number of viewers are building.  Who will build the most viewers fastest?  Do they need to raise funds to reach larger audiences?  Will they need more teams?  How do you duplicate a star?  How do you scale these business?  The winners will be the geeks providing the software.

For the first time you will see the faces and hear the voices of all those people who really change the world.  No longer are we stuck watching the self-promoting politicians – bring on the geeks!

Will they ask the entrepreneurs about their Equity Fingerprints?

Can you pick an entrepreneur, blogger or footballer?

Robin Preston is the BBC’s business editor and his blog, Preston’s Picks, has a million readers.  Would you pick him to be a great broadcaster and writer?  Well, he comes from an intellectual hot-house (father Lord Preston, economic guru of Queen Mary College, London and mother works in the NHS) so you could take a good guess.  What about Pele?  His father was, take a guess, a centre forward and the family football crazy.  Early research at CMI shows the one of the best indicators of a successful entrepreneur is if the father was an entrepreneur.

I wonder about Jerome Kerviel of   Societe Generale who has just lost the bank £3.7bn?  More importantly perhaps, what will his children do?

I guess it is all about nurture and nature.  I remember a bank manager saying that you can tell if a person is an entrepreneur when you shake their hand.  I offered a wager if he could pick out the successful entrepreneurs in the room but he was not keen to take me on.