Invested Interests

6 Reasons Why Startup Prototypes Attract Investors

It’s a long way from an entrepreneur’s “idea” to a working product with a real market and paying customers. A necessary intermediate step for proof of concept, credibility with potential investors, and communication with your team, is a working prototype. Building a prototype should be an early and high priority task for every startup.

A prototype doesn’t need to look great, or be built to scale, but it better accurately translate your vision into something real and tangible. For less tangible products, like software, it should simulate the look and feel of the final product on relevant base hardware. Here are some key objectives to keep in mind when designing your prototype to make it attractive to investors: Read more

Invested Interests

Are Startups Now Changing the World Instead of the Web?

It’s too soon for rigorous data analysis. I don’t have surveys. But I’ve been through about 120 startup business plans in the last month and it seems like there’s a big shift. There’s a lot more science and a lot less web. There’s a lot more save the people, save the world, than there is save the web. surgery

I’m talking about what I’ve seen as a member of a local angel investment group and a judge at four business plan competitions. This is just anecdotal. Still … it’s been a long time since I’ve heard somebody promise the next Facebook, or next Twitter, or next Netflix.  Read more

Tim Berry , Founder, Palo Alto Software
April 24th, 2012 0

Invested Interests

Startups Need the ‘Why’ Before the ‘What’ to Build

All too many startups are founded simply on the basis of a new and exciting technology invented by an industrious technologist. This is the origin of the “solution looking for a problem” and “if we build it, they will come” syndromes, which result in surprise and frustration waiting for funding, and waiting for customers that don’t materialize.

The right approach is to start by solving a problem causing real pain to a large number of customers willing to pay real money for a solution. Develop the solution with your technology, and develop a strategy to maximize your impact in the marketplace. I’ve talked about the solution part several times, so this article will focus on the value of a strategy. Read more

Invested Interests

Angel Investors: Watch for Business Plan Competitions

I just finished three days as a judge for the Rice University million-dollar business plan competition, which was held at the Rice campus in Houston last Thursday through Saturday. If you’re an angel investor and you aren’t aware of business plan competitions, maybe you should be.

The finals were very impressive. As the six finalist companies went through their pitches, every single one was a very attractive investment. If you’re curious, look at NuMat Technologies, the winner. Then look at Medtric Biotech, Lemm Technologies, SolidEnergy, Solanux, and Salveo Vascular, ranked second through sixth, respectively. You’ll see nothing there but high-end technology, innovations, intellectual property, experienced management teams, very impressive resumes, and huge markets. Read more

Tim Berry , Founder, Palo Alto Software
April 18th, 2012 0

Invested Interests

Amount of Startup Equity Depends on Contribution

One of the first tough decisions that startup founders have to make is how to allocate or split the equity among co-founders. The easy answer of splitting it equally among all co-founders, since there is minimal value at that point, is usually the worst possible answer, and often results in a later startup failure due to an obvious inequity.

Another common “failure to start” situation I see is one where the “idea person” insists that the idea is 90% of the value (and 90% of the equity). In the real world, the “idea” is a very small part of the overall equation. A startup is all about “execution” – meaning the equity should be allocated based on the value that each partner brings to the table in each of these dominant variables: Read more

Locate the nearest exit

When Good Legal Advice Is Worth $10 Million An Hour

One of the highest profile liquidity events to date in 2012 is Facebook’s announced deal to acquire Instagram for $1 billion.  The popular mobile photo-sharing service should fit well into Facebook’s growth strategy as a soon-to-be-public company, but its eye-popping valuation — more than that of the New York Times, for those keeping score at home — is made more extraordinary by the fact that Instagram is run by only 13 employees.

Setting aside questions of unique strategic value for the moment, what could possibly make Instagram worth ten figures?  Brand recognition, goodwill, user loyalty, mushrooming usage metrics, sure — but perhaps most importantly, a mountain of intellectual property.  My quick-and-dirty assessment, based on pure speculation with no inside knowledge, produced the following taxonomy: Read more

Antone Johnson , Founding Principal, Bottom Line Law Group
April 12th, 2012 0

Invested Interests

2011 Halo Report :: US Angel Group Activity

At the Angel Capital Association (ACA) Summit in Austin in March, the Angel Resource Institute reported on angel group activity in 2001 in the first annual Halo Report.  I found some of the results quite interesting.  For example:

Bill Payne , Angel Investor , Frontier Angel Fund
April 10th, 2012 0