Invested Interests

What? Avoiding Undue Diligence? Seriously?

I suspect this is one of those provocative posts that gets misquoted, misaligned and misunderstood, and definitely not to be taken at face value. Still, read  Avoiding Undue Diligence: My Strange Approach To Angel Investing, in which Dharmesh Shah argues against due diligence in angel investment. 

Dharmesh Shah on Avoiding Undue Diligence

I don’t subscribe to the idea in the title. And I’m familiar with Robert Wiltbank’s exhaustive research on angel investment — as in this summary in TechCrunch — that shows a serious correlation between more hours of due diligence and higher incidence of successful exists. 

Still, Dharmesh’ refreshingly contrarian, and unabashedly honest, analysis is worth a good read. And the comments are lively too. 

Furthermore,  I’m really intrigued with this quote near the bottom: 

There’s no such thing as too many companies starting up.  But, there is such a thing as not enough companies shutting down.

Now there’s a thought worth following up. 

Tim Berry , Founder, Palo Alto Software
February 5th, 2013 0

Invested Interests

10 Sage Quotes From $100M Entrepreneur Winners

Robert Jordan image via HowTheyDidIt.com

Entrepreneurs are a notoriously stubborn (some say confident) group of people, so I see many of them making the same mistakes that predecessors have made. Thus I’m convinced that it’s useful for all of you to step back from time to time, and listen to some sage advice from people who have been there and enjoyed success.

Recently, as I was perusing a book by Robert Jordan, titled “How They Did It: Billion Dollar Insights” I saw some wisdom and inspiration that made sense. All the quotes come from entrepreneurs who have built and sold at least one $100 million company. Of course, you can always argue that each was just in the right place at the right time, or was lucky, or had a rich uncle to get them started, but it would be smarter to listen to the messages: Read more

Industry Experts

How Reed Hastings’ Facebook Status Update Landed Netflix in SEC’s Crosshairs

Reed Hastings headshotLast month, the SEC announced it was taking action regarding Netflix’ (NFLX) securities compliance based on a Facebook status update posted by CEO Reed Hastings.  The move came as a shock to many in the tech business community, in which we’ve become accustomed to real-time disclosure by company executives through social media.  What could be wrong with more transparency?

To understand the SEC’s point of view, it’s necessary to review the principles underlying securities law in the United States.  Compressing 80 years of history into a paragraph, securities regulation here is fundamentally a disclosure-based system.  With a few exceptions (notably corporate governance requirements imposed by the Sarbanes-Oxley Act in 2002), beginning with the original Securities Act of 1933, Congress and the SEC adopted a philosophy that financial markets work best when investors are free to make their own decisions based on timely, complete and accurate disclosure by publicly traded companies.  Modern theories of economics and finance teach us that in a world of perfect information, the market will decide what a fair price is for any company’s stock at any point in time based on its current financial condition, results of past operations, analysts’ forecasts of future performance, industry conditions and so on.

The key words worth repeating here are “perfect information.”  Like all forms of perfection in an imperfect world, it exists as an aspirational goal, not in reality.  Certain people inside a company will always know more than the general public.  This is why insider trading can be a criminal act:  Trading on the basis of material nonpublic information that would affect the stock price is a form of cheating, taking advantage of those who lack access to the same information.  The person or business on the other end of an insider trade is at an automatic disadvantage.

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Antone Johnson , Founding Principal, Bottom Line Law Group
January 31st, 2013 1

Invested Interests

The Startups Weekend Phenomenon and Angel Investors

Actual, fundable, serious startups in a single weekend? No. Real? Great learning experience? And worth doing? Yes. 

Last Sunday night I judged nine pitches from nine groups that started from scratch just two days before, late Friday afternoon. They had some good ideas, good pictures, a prototype or two, some good video … and an entertaining event. 

Startup Weekend startupweekend.org

I’m posting this here for two audiences: angel investors and founders (including would-be and wanna-be founders) of startups. 

I was one of four judges, all of us members of local angel investment groups working with the gust.com platform. In two hours we had pitches and questions and answers. Then we met for 30 minutes and chose a winner. This was in Corvallis, OR, for the Willamette Valley. 

This isn’t exactly news. It was a Startup Weekend as conceived and licensed by the organization at startupweekend.org, supported by the Kauffmann Foundation, Google, Microsoft, Amazon.com, and others (my company was a sponsor of this local one). You probably already heard of it. I had, and I’d been invited to speak or judge before, but hadn’t been able to actually do it until now. The Startup Weekend organization has run 970 of these weekends in 108 countries and is doing about seven or so every month now. 

It’s a good reminder about what it takes to start a business. The whole thing started Friday with a vote on the better ideas. They formed teams, worked Friday night, Saturday, and Sunday. They ended up with market validation, execution, and what seemed like a lot of progress in very little time. Several of the pitches looked like interesting prospects that could happen. 

 It was a lot of fun, good for the local startup community, and good for the 75 (or so) people who spent all weekend doing it. 

 

Tim Berry , Founder, Palo Alto Software
January 30th, 2013 1

Invested Interests

How to Maximize Results in the Art of Persuasion

Howard Gardner photo via TheDish.org

Being a good entrepreneur means being able to effectively convince an investor that you have a great idea, persuade partners that your approach is right, and convince potential customers that the solution is right for them. If all your ideas are intuitively obvious to everyone, you probably aren’t thinking outside the box, or don’t really have the next big thing.

The process and tactics involved in winning over others with your views have has been studied extensively by Howard Gardner, a Harvard developmental psychologist, in “Changing Minds: The Art and Science of Changing Our Own and Other People’s Minds.” It turns out that the same principles apply to changing your own mind (learning new things), as well as others. Read more

Invested Interests

Startups Need the Right Team Mindset to Survive

Image via Facebook.com

Since the days of Henry Ford, mass production has been the Holy Grail of business, rather than build-to-order. Too many businesses haven’t noticed that we have come full-circle, where mass customization is required now to win. Customers have come to expect immediate and tailor-made responses to their needs, and the businesses that fail to deliver quickly fall behind.

Changing the culture and mindset in an existing businesses is difficult and slow, so this becomes another “opportunity” for smart entrepreneurs and startups to excel. John M. Bernard does a great job outlining seven key steps to success today in his recent book, “Business at the Speed of Now.” They apply to any business, but every startup better lead with these: Read more

Invested Interests

Startup Map & Trends Analysis – December 2012

December update and insights about new startups:

India became second last month as the country with the highest count of new Startups, right below the United States. India’s average position for the year has been fourth, it came up to third in February and between June to August, but only reached second for the first time this past month.

Top 5 Us states remained steady this month and were consistent with their yearly averages.

New startups creation stages remained steady and in line with the rest of the year, with 13.1% in Concept Stage, 43.2% in Development Stage, 34.5% in Product Ready Stage and 9.2% in Revenue Stage. The trend noticed last month of Product Ready companies declining appears to have dissipated as all stages regained their balance.

Industry wise, interesting things are happening, the percentage of total Internet Web Service companies (the biggest industry for new startups) appears to be on the decline, with a market share loss of 1.8% in December when compared with November (from 15% to 12.2% respectively).