How can Australia kickstart the local startup community?

Sebastien Eckersley-Maslin makes some excellent points, most of which are ones that I would have made. In particular, getting to critical mass (of entrepreneurs, angel investors, engineers, et al) is perhaps the most important thing you can do. Whether this is by City (the most useful) or pan-Australian (perhaps a bit easier), it provides a host of benefits both in terms of availability of resources and visible success stories for new entrepreneurs.

Australia has some very active, organized, groups of angel investors, and they should be embraced and brought into the startup community as a resource.

An online central hub of the entire startup ecosystem would be a great way to bring all of the startup constituents and components together.

Celebration of entrepreneurship is also important, because fear of failure is one of the most debilitating things for an industry that needs to be nurtured. Here, Australia should take as its model we crazy Americans, rather than our delightful British cousins. In the US (particularly in tech centers such as Silicon Valley or New York), failure is almost a badge of honor, and is largely perceived to be a great learning experience. Across the sea, however, a single failure can often ruin reputations and social standing…which means that many great entrepreneurs never dare to start.

Finally, immigration policies are certainly an important subject for discussion. Here in the US we are having the same debate, for the same reasons. Although we have a lot more people than you do, every year there are tens of thousands of foreign-born great people who would do wonders for our tech community, but who are not allowed across our borders. You have the problem to an even greater extent, and I would suggest doing what you can to increase the number of qualified people who are able to enter the country and join your startup workforce.

*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *

The Good, The Bad, And The Ugly Of Software Patents

Image via Flickr by Joshua Gajownik for opensource.com

Image via Flickr by Joshua Gajownik for opensource.com

I always advise software startups to file patents to protect their “secret sauce” from competitors, and to increase their valuation. The good news is that a patent can scare off or at least delay competitors, and as a “rule of thumb” patents can add up to $1M to your startup valuation for investors or M&A exits (merger and acquisition).

The bad news is that patent trolls (non-producing companies that make their money from licensing patents) can squeeze the lifeblood out of unsuspecting entrepreneurs, as exemplified by the recent mess around Lodsys suing small Apple IOS developers. This patent holding company has charged infringement and demanded royalties from every app developer for the iPhone and Android, for a feature most agree has been in apps for many years. Read more

Martin Zwilling , Founder and CEO, Startup Professionals
October 19th, 2014

Should I give my seed investors anti-dilution protection?

What this investor is seeking is called “permanent, full-ratchet, anti-dilution protection”, and that is neither (a) in line with the market, nor (b) practical. Even if you were willing to give it to him, it is highly, highly unlikely to stand up beyond the next financing round, because there’s no way your next investor is going to take a dilution hit for this first one.  That’s why anti-dilution provisions are typically only applicable to the next financing.

So, no, you simply can’t give him what he wants. (Assuming that the next investor wouldn’t stomach it, there are only two possible outcomes: A: the new investor forces the original one to waive it, or B: the new investor walks away from the deal.)

Instead, let me suggest that you offer “weighted average anti-dilution protection” to the next equity round. That is fair and reasonable, and should provide an appropriate level of comfort to this investor.

*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *

Crowdfunding: KickStarter, Indiegogo, AngelList, Gust: How to choose?

First, it’s important to understand that the four platforms you list fall into two very distinct groups.

Kickstarter and IndieGoGo are project-based crowdfunding platforms through which anyone can contribute money, either as a donation or with the promise that they will receive a tangible ‘reward’ of some kind if the project is successful.

Gust and AngelList are equity-based platforms, used by Accredited Investors  to facilitate the investment of money for an ownership interest in a company.

As such, depending on what you are trying to do (fund a project or get permanent investors into your company), you would select one group or the other.

Once you’ve done that, for the first group it doesn’t make sense to participate on more than one platform. That’s because in the vast majority of cases, most of your contributions will be coming from your own network, and you don’t want to divide them up (since you will need to hit your ‘target’ minimum raise.)

For the equity group, however, it is not uncommon (and there is no downside) to listing on both Gust and AngelList. Neither has any cost to establish a profile, and both provide visibility to active angel investors and others in the startup ecosystem (Gust primarily to organized investors and funds, AngelList primarily to independent investors).

*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *

Right Entrepreneurs In The Right Place Get Funded

Image via Flickr by Jeff Belmonte

Image via Flickr by Jeff Belmonte

I’m a strong believer that investors invest in people, before they invest in a business plan, or an idea. But I continue to learn that there are a host of other factors, maybe not even related to you or your business, that could keep you from getting the funding that you need. You may not have control over many of these, but it helps to know, for planning purposes, what is really happening.

Obviously, a key factor is always the state of the economy and the mood of the venture capital community. The good news is that both of these are looking up these days. According to the Silicon Valley Venture Capitalist Confidence Index® for the First Quarter 2014, the Q1 increase marks seven consecutive quarters of positive sentiment among Silicon Valley venture capitalists. Read more

Martin Zwilling , Founder and CEO, Startup Professionals
October 12th, 2014

Is making Equity Crowdfunding available to all a good thing?

Part of the challenge is the enormous amount of ignorance surrounding this suddenly hot topic. There are thousands of companies that “the crowd” can fund without restriction, including Apple, Google and Facebook. These are “publicly tradable companies”, and what makes them so are the extensive rules surrounding disclosure, transparency, trading and other aspects of their corporate existence.

But since there are millions of other companies that do not fall into this category, the U.S. Securities and Exchange Commission provides certain limited exceptions to allow individuals to invest in non-public companies.

Chief among the [highly imperfect] criteria used to determine whether companies can solicit and accept investments from specific individuals without providing those investors the protections required of public companies are income and/or asset tests. While by no means ideal, these rules are there for very good reason.

Perhaps the single biggest challenge faced by equity crowdfunding is the fundamental difference betwee “investing” and “supporting”. A quick, impassioned discussion of this can be heard in my recent keynote at CROWDFUNDx:

http://socialmediaweek.org/blog/…

*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *