Angel Investment news roundup

Here is a couple of latest news on Angel Investors.

• University of New Hampshire's Whittemore School of Business's Center for Venture Research has released the Angel Market Analysis report (in PDF format) that shows the Angel Investors market in the US growing 10.8% in 2006 with investments totaling USD25.6 billion.
• Toni DasGupta, a member of Tech Coast Angels and a serial entrepreneur, wrote an insightful article on Angel Investors. Good read if you're about to meet one for the first time.
  

Looks like Angels are finally being noticed. Let's hope this doesn't feed the egos — the last thing we need are superstars.

German museum showcases counterfeits and fakes

This is a follow-up to my article on China counterfeits and other intellectual property infringements.

BusinessWeek is reporting that German museum in the town of Solingen (near Cologne) has opened a permanent exhibition of 300 fakes side-by-side with the originals that the fakes rip off. If you're keen to see the photos of the comparison, click here.

In this case, "Imitation is definitely not the sincerest form of flattery", rather it's another example of intellectual property theft. Let's hope the authorities in China and other countries with infringing companies realize that lack of Intellectual Property protection kills innovation and dissuades investors from investing in companies…leading to lack of new jobs creation and no additional tax revenue!

Don't pretend to be a VC…unless you're one

Starbucks is an interesting place, if not for the interesting conversations I often overhear. This morning while taking my usual morning cuppa, I overheard an interesting conversation between two individuals…one claiming to be a VC trying to introduce venture investment to an ex-corporate executive. Though I didn't original intend to listen in to the conversation, the essence of the conversation proves too irresistible that my usual iPod stayed snug in my Targus bag. While I'd agree with most of what is said as being representative of what VCs' roles are, the following took me by surprise.

• "As an early-stage VC, I don't invest in companies unless they're profitable. Ideally they already have revenue of a million or more."
• "My role then as a VC is to get them to the next level. For e.g., if they're already making 1 million, my value to them is to help make 4 or 6 millions."
• "The business or management track record doesn't matter."
  
• "The first step for experienced ex-corporate executive is to talk to headhunters to promote themselves in order to establish themselves and grow a network of contacts."

I do not agree with the above statements as representative of what angels or VCs' roles. First thing first, a typical early-stage VC (though rarely the senior partners of the firm) generally work hard to identify potential startups from the mountain of business plans. If the partners agree with the assessment, a term sheet is prepared and the process of negotiation is initiated with existing shareholders (usually founders and management) of the attractive startups. If all goes well, then a deal is struck. The deal flow is often the leading indicator of a potentially successful VC, though the financial windfall during the exits is the best lag indicator (though it generally takes at least a couple years to see it).

While I agree that most VCs are averse to risk and would prefer to invest in a cashflow-positive (better yet profitable) startup, it's not the norm. Besides, if the startups are already sustaining a million-dollar revenue (assuming no collection issues and not future booked sales), founders and existing shareholders would have less need of VC capital to grow.

Thirdly, the business track record does matter. Seasonality (especially for those serving consumer), one-time hits (for e.g. a major contract), and similar anomalies point to risks to future earnings. To suggest this and management track record are irrelevant are at best misleading. Frankly, at this point I'm beginning to doubt the person's claim of being a VC.

Lastly, to suggest to an experienced ex-corporate executive that the way to embark on a career as a VC is to spend time with the executive search firms is a no brainer. Companies that can afford executive search firms are usually established (unless the CEO or HR VP/Director are simply throwing cash out the window). As such, the company that executive search firms keep hardly qualify as a prime source of startups. You'll have better luck hanging out with investment bankers and any (non-retail) bankers.

The moral of the story is this. For those "VC"-wannabes out there, please fact check before making claims (such as those above) in public. The quiet, smiling person at the next table who might very well be a angel or VC may just walk over and point out your errors.* As Al Pacino's character so aptly said at the end of Devil's Advocate, "Vanity, it's definitely my favorite sin". For the record, I'm an angel investor. It's less glamorous than a VC but it's just as fulfilling.

*For the curious readers, I resisted the urge to correct the person. My morning quality time with my frappuccino is too important to be interrupted by a (well-intentioned) confrontation.

STOLEN: Victoria Secret bras & panties

I couldn't help laugh when I read this at Reuters. Apparently, three brazen New Jersey shoplifters stole nearly US$12,000 worth of bras and panties from a Victoria's Secret store at Newport Center Mall in Jersey City.

Police suspect the shoplifters accomplished their feat by stuffing the goods into bags designed to foil anti-theft equipment at the Victoria's Secret store while the shop was open for business. Surveillance cameras captured two men and one woman jamming undergarments into large bags and walking past customers and staff of the store.

Reuters file photo by Mike Segar

Police said the thieves took over $6,900 in panties and more than $4,900 in bras. Victoria's Secret bras retail from $30 to over $50. Panties cost between $5 and $20, according to the company's website. No arrests have been made since the crime was reported Tuesday night, said Lt. Edgar Martinez, spokesman for the Jersey City police department. "This isn't something we've seen before. It's a lot of underwear to take," said Martinez. You don't say!

Seth Godin's thought-provoking presentation

I'm not a big fan of "management gurus" or any authors cum gurus. Oftentimes listening to them speak is an exercise in watching them cleverly string a series of big-sounding polysyllable words to describe otherwise common-sense notions…while entertaining (read hoodwink) us. In short, their books and talks often are too generic and not applicable in solving our problems.
The litmus test I apply to decide if I'll give my time (and money if it's a book or a conference) is "How will I apply this author's or speaker's idea to solve problems I face?"
So it's with a bit (OK, a lot) of cynicism that I decided to heed my friend's suggestion to listen to a 5-minute clip of Seth Godin. Was Seth convincing? Did he pass my litmus test? Watch for yourself and you can guess the answers.

Founders wisdom: Bootstrapping and Part-Time Work

If you follow conventional wisdom as taught in MBA classes, the first few steps for entrepreneurs starting new companies invariably involves writing a business plan, pitching the business plan to secure funding, and devoting full-time to nurturing the companies through the startup phase.

But what if you don't have a business plan (but has a well thought out idea), live out of reach of most VC and angels, and cannot have the risk of a startup failing jeopardize your financial well-being (and presumably stable career)? Does this mean you'll never (or should ever) be an entrepreneur? I believe not.

Entrepreneurship takes many form. Deploying your skills and knowledge to help paying customers in your spare time is a good way to "test the water". You'll discover if your personality and temperament are suitable for a life as an entrepreneur. How you

• react to customers' requests,
• understand their needs,
• balance budget,
• manage cost,
• negotiate a fair payment, and
• market your services

provide valuable insights to your readiness to be a full-time entrepreneur.

So, don't be discouraged if you're pondering whether to jettison your comfortable corporate career to embark as a budding entrepreneur. The first few steps can be less risky (and relatively painless) if you free yourself from preconceived notions of how to start, and take small steps.

Make millions, improve lives, and enjoy life

Read in one breath, this post's title sounds like a mission impossible. Yet surprisingly, it isn't. I'm not advocating Multi-level Marketing schemes, or even the current Green Eco initiatives. I'm talking about entrepreneurship.

Lost in today's business tomes is the simple truth. You can make a difference in improving people's lives by founding a company to service their unmet needs. Will it take time and untiring effort? Yes. Is it impossible? No. Are there real people out there enjoying life making millions improving their customers lives? Absolutely.

One of the key to having a meaningful and successful life is to apply yourself. Few are born with silver spoons. Remember that short cuts rarely work out, nor does passive income (you'll need to acquire adequate economic capital before it starts working for you).

In this age of commoditization, outsourcing and consumers growing fascination with free stuff, the old adage still holds true, "pay peanuts and you get monkeys". Your path to financial independence and better quality of life starts with identifying how to tailor your services and products to improve these consumers lives, and adding value to differentiate from your competitors.

The next step is to surround yourself with like-minded, driven, motivated people. Entrepreneurship is a rewarding journey, oftentimes a voyage of self-discovery. Like all worthy endeavors, you'll accomplish more if you're willing to work with and learn from others. A better life awaits you, you'll have to decide if you want to put in the effort to earn it.

Ericsson leaves WiMax for dead

According to Red Herring, Ericsson on Friday March 23rd confirmed reports that it has quietly closed down development and manufacturing of WiMAX (a next generation wireless broadband technology) products. This is significant as Ericsson is the first major telecommunications equipment maker to pull out of WiMAX. To some, this development may be surprising. However a careful examination of how the telcos view the WiMAX threat (and more importantly VoIP) to the telcos bottom line of monetizing its control of telecommunication infrastructure reveal a conflict of interest.

“WiMAX offers nothing that cannot be offered by 3G (third generation mobile) based technologies,” said Persson Mikael, manager of strategy and business development Wideband CDMA at Ericsson. Sounds innocuous enough, except that it barely scratches the surface. Ever since VoIP gained media and thrifty consumers attention, telcos have been trying to stop any further technology from encroaching onto their revenue pie. Their collective response to the perceived financial threat now has claimed its first trophy. Ericsson, like any business who makes a significant portion of their revenue from selling telecommunication gears to telcos, is loathe to upset the telcos. So while Ericsson would love to serve the future WiMAX market, its present survival depends on continuing its relationships with telcos — which outweighs future considerations.

As the Red Herring piece aptly puts it, "North American regulatory issues meant that in order to be able to compete in broadband data new technologies were required to gain new licenses. In Europe, however, regulator mandated unbundling meant new entrants had access to existing infrastructure, so for example, being allowed to offer new digital subscriber line (DSL) services over existing fixed telephone connections offered by exiting carriers." This and the fast-paced evolution of the technology may well sound the death-knell of WiMAX more than the departure of Ericsson…which is a pity when you think about it. Between corporate self-interest, an industry's paranoia, and the constant march of technology, WiMAX doesn't stand (never stood?) a chance.

Blackstone Group takes the IPO route

Irony of ironies…Blackstone Group, the private equity firm famous for buying out some public companies and taking them private, has filed to issue some IPO stocks. Initial estimates on the street values the IPO at USD4 billion representing 20% of the Blackstone's worth. Goldman Sachs is expected to develop the IPO prospectus. Blackstone's S-1 filing with the SEC is now available here.

Viacom sues Google, YouTube for USD 1 billion

MSNBC just reported 5 minutes ago that Viacom has announced it has filed suit against YouTube and its corporate parent Google Inc. in federal court for alleged copyright infringement and is seeking more than $1 billion in damages. For more details, click here.

Super deals for the road warriors out there…

If you live out of a suitcase, and fly more hours than you drive, then here're some deals for you.

American Airlines is offering a really good deal for the Chicago O'Hare (ORD) to Shanghai Pudong (PVG) sector for AAdvantage members. At US $618, you really can't get a better deal than this. Sean, now you've got no excuse not to visit Shanghai. Log in to American Airlines and visit the AAdvantage member section.

Singapore Airlines is offering discounts for flights between the following sectors

Destination	Economy Class Airfares below are only valid for minimum 2 passengers travelling together Malaysia Ringgit (MYR)
	Adult	Child
Kuala Lumpur - Singapore	398	267
Penang - Singapore	380	285

Tickets must be purchase through Singapore Airlines website.

Conditions apply for both offers so grab them while they're available.

I Ning, U Ning, Everybody Ning Ning

No, it's not the 1st line from the latest runaway hit song, nor is it a new bling bling craze. After being prodded by fellow Web 2.0 entrepreneurs, I've decided to jump in and create MYCocoaHeads at Ning.
Created by Marc Andreessen and Gina Bianchini, Ning makes it a cinch to create social networking sites. In addition to the usual fare of forums and blogs, its media support is impressive including photos and videos.
Will this catch on like Second Life? Who knows for sure? But with Ning's ease of use, I won't be the least bit surprised if Ning is acquired in the next 24 months.

How to present to angels and VC investors

A reader Kyle wrote an email asking if I could think of some do's and do not's before he meets some investors for his new startup. So here's my thoughts (in no particular order) having attended my fair share of such meetings.

1. Learn as much as you about who you're meeting, for e.g. the industries they're from, markets they've worked in, education. For most VCs, these are fairly easy to find from their firms' websites.
2. Rehearse your concise pitch. Write down, then rehearse in front of a mirror the key reason(s) why your startup will succeed.
   
3. Keep the number of your presentation slides reasonably low enough to allow your angel investors and venture capitalists interested. Prefer quantitative, recent facts over guesses, qualitative, and generic claims (like "I believe…"). These angels and VCs hear lots of pitches, so unless you're an well-known, established personality with a track record to boot, what you believe ain't worth much.
4. Know what your investors want, and spend more time on them. I'm not saying fudge the facts, but instead show you've done your homework and here're the facts.
5. Be prepared for surprises. Unless you're experienced, chances are you'll be floored with one (or more) unexpected questions for which you simply have no answer. That's ok, come clean and ask if your investors will be interested if you get back to them with the information after the presentation.
   
6. Expect rejections. I don't know of many entrepreneurs who can claim they always win over investors after every presentations. To ask for funding is not an easy thing to do. The art takes time to perfect. Be thick-skinned, take rejections well, and learn from them.
   

Good luck Kyle!

A Secret of Success in Life

A question at recent event got me thinking. "What is the secret of success?"
Of course different people define success differently — most people can come up with at least two definitions in promptu esse. If you define the question as "how or what do I do to achieve success in life?" then my experience suggests a possibility — inculcate a habit, not just any habit, but the habit of keeping your promises as opposed to "consulting-speak" of "managing expectation". The habit is really simple to learn.

1. Before making a promise, fully understand the complete request and the conditions to satisfy that request.
2. Make a promise that is in your and the requester's mutual interest AND ensure that promise will satisfy the complete request i.e. not partial fulfilling the original request.
3. Commit to perform the steps to fulfil the promises.
4. Assess to check that the conditions to satisfy the original request have been met, or better yet, exceeded.
   

This simple but effective applies in personal relationships as well as in managing your professional career. Rarely (actually never) have I seen anyone who fails to keep promises manage to succeed, regardless of how much effort is put into networking, being charismatic or being presentable. First impressions matter, but people will think twice of trusting you if your promises are unreliable.

Making the jump from Fortune 500 to startup

Like some readers here, I've exchanged the financial security net of a Fortune 500 company for the entrepreneur/angel investor bandwagon. Instead of dealing with corporate fiefdom, intrigue and politics, nowadays I juggle the needs of driving startups growth, sustaining innovation, keeping founders focused and pacifying investors nerves.

At gatherings with fellow entrepreneurs and angels who tracked the same path, sometimes inevitably our discussion wander to comparing our quality of life now with the past. It's a journey not for the faint of heart and life does indeed throw some surprises from the left field! Gwen Edwards has succinctly chronicled her experienced jumping from a Fortune 500 corporation to a startup in a Businessweek article. If you're contemplating a similar decision, her article will provide a useful precursor to what lies ahead.

Adobe trials ad-supported Photoshop software

As I read CNet's report that Adobe plans to offer an online, ad-supported Photoshop in 6 months, I can almost hear the entrepreneurs, angels and VCs shake their heads in collective disbelief. "Small nimble startups innovate, large companies develop" is the unshakeable mantra that drives us to seek innovation at startups.

Don't get me wrong, I think this is great for Adobe shareholders. Bruce Chizen (Adobe's CEO) is right to explore alternatives to the "software in a box" strategy that had driven profits in the software industry till now. The next innovation (and companion surge in revenue) will not come from the current way of distributing software. The success of Salesforce.com and Google clearly illustrate this.

The question is whether "ad supported software" will work for Adobe and by extension existing commercial software. Is Adobe reacting to Google's Picasa? An "establish a beachhead before the others" strategy? I personally believe a "software as a service" is better suited for Adobe products (especially those targeting consumers and non-professionals for e.g. Elements). Only time will tell…