VC in DC

Fox Business Network: The Pitch on 5.30.09

The Fox Business Network has a Saturday show called "Your Questions, Your Money" that answers questions related to small business, start ups and raising money.   I have been on the show a couple of times and will be posting a few clips on the blog.  I have been so impressed with the show and the dedication of the team there.  And it has certainly been enjoyable to participate in the production.  I am grateful for the opportunity.

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ADOTAS Guest Column

Image by Toban Black via Flickr

I contributed an article on the auto industry and interactive advertising which was posted yesterday.

Here is a link to it.
Adotas

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LivingSocial's Pick Your 5

Image via CrunchBase

The recent phenomena of the Pick Your 5 application on Facebook has generated a lot of press. The most interesting one to me was an article in the New York Times magazine which attempted to explain the popularity and value of the "Pick Your Five" and similiar products.   The article didn't refer to LivingSocial or the product directly.  Instead, the author noted the popularity of these "types" of products. 

The article attributed the popularity of these applications to their effectiveness as conversation starters.  That was certainly my experience.   When a long time friend would post a list of their first five cars, it prompted memories and conversation.  All of which highlights the power and potential of Facebook as a closed environment of real people interacting with people they know in a direct way. 

New York Times Magazine

Some mainstream....

Image via Wikipedia

Grand Rapids Press

Some more industry related....

Webpro:

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Deloitte VC Panel on July 1st

 The talented Ellen Mundell of Deloitte has put together this sure to be interesting event.

Image by mada299 via Flickr Venture Capital Overview – 7/1/2009 Featuring A Panel of Local VCs who are actively investing Wednesday, July 1, 2009 The Greater Washington Area Technology Venture Center (TVC) is pleased to invite you to our next program to hear about the current state of the VC market. Despite the lukewarm – yet slowly recovering! – economy, this group of VCs, each from four different local funds, is actively investing and optimistic about the future.  We are looking forward to hearing from these four well-known and highly regarded VCs: John Backus - Founder & Managing Partner, New Atlantic Ventures Scott Frederick – General Partner, Valhalla Partners Steve Fredrick – General Partner, Grotech Ventures Sever Totia – Principal, Edison Ventures When:   Wednesday, July 1, 2009, 7:30 a.m. – 9:00 a.m. · Registration, networking, and breakfast - 7:30 a.m. · Program – 8:00 a.m. – 9:00 a.m. Where: Tech Venture Center 1750 Tysons Boulevard 5th Floor, Room 5052 McLean, VA 22102 RSVP to: emundell@deloitte.com

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Twitter: Grotech General Partner Steve Fredrick on Bloomberg

Image via CrunchBase

Steve Fredrick was interviewed today on Bloomberg about Twitter and its impact.  

Finding Investment Capital or VC: The Fast Path via Matching

If you want to find a match, it is best to understand what you're matching.

All Venture Capitalists can be differentiated on 3 axis; the stage they invest in, the geography they focus upon and their technology opportunity areas.    If you're a CEO seeking money and you don't match up with these, you're really wasting your time.

At Grotech Ventures, we describe ourselves as early stage investors in high potential technology companies.  Our geographic focus, which is a reflection of our personal networks over the last 25 years in the IT business, includes the Mid Atlantic, Southeast and Mountain West.  So if you're outside these areas, because of stage, technology or location, we are not likely to be a good investor to approach with an your idea.   Sure, there might be an exception but those exceptions are never going to be the rule.

So, the investment stage of the investor is the right starting point.  Seed investors won't want to look at your Series B round, for example, and if you're pitching a Series B -- you really don't have time to waste as you're already running an operating business.  As a practical matter, investors will do seed/early, Series A and B rounds, later stage (Series C+) or expansion capital so I don't want to split hairs and advise only approaching those with very specific focus.  But one gets the idea, investors don't like leave their comfort zone or neighborhood.

What is the VC's neighborhood?   Investment historical data is that 80% of all Venture Capital is invested within 200 miles of the VC's office.  It is by and large a regional business.  Yes, there are VC's that invest nationally and internationally. But, the bottom line is that VC's want to be close to their investments literally and figuratively.   While I don't have data to support it, I would speculate that the earlier stage investors want to be even closer than the 200 mile average.

At Grotech, we talk about staying close to the technology areas and markets we understand and are capable of delivering the best value to our entrepreneurs.  And while that varies, to some degree, by individual, we know what we don't know.   If you're the latest thing in alternative energy, take it to someone who will "get" your idea and admire your insight.    I wrote in an earlier blog about the best way to get a VC firm attention.  The jist of which was; the current CEO's are an important conduit and filter.  Those current CEO's are also a clear analog about the comfortable technology areas of the VC. 

The start up CEO needs one yes answer to the funding quest.  The fast way to achieve it is to narrow the search at the beginning by matching the idea, stage and geography to the right candidates.

This article has been updated from the original post with the supporting video from Fox Business Channel.

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Need a VC List ? Here is the right one in the right way

Image by 500CPM via Flickr

It appears that Larry Cheng of Fidelity Ventures has built the end all, be all listing of VC Blogs.  Larry was previously with Battery Ventures and Bessemer so he knows his way around the industry.  If you have interest in a very functional VC list, where you can spend some time in order to gain the perspective of various VC's, this is your list.    I think Larry has done entrepreneurs a favor by building this list because as I have written previously, this is a match making effort for VC's and entrepreneurs.   If you're looking for money, invest some time on these blogs to find the VC(s) likely to be interested in your opportunity.  Avoid the most common mistake of pitching VC's, which is pitching to ones that will never have an interest in your business.

Here is a link to Larry.

Larry Cheng info

And here is the list of VC blogs ranked by their number of Google Reader subscribers.
Global VC Blog Listing

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Fox Business Network: LivingSocial and Crowd Sourcing on 4.25.09

A recent Fox Business appearance with a plug for LivingSocial.

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StartUpHire: Work for Venture-backed Startup

Image via CrunchBase

I am always impressed by the number of people interested in working for a start up.   Both from the students I teach and audience members from various speeches, there is consistent and ongoing interest in the start up work environment.   For good reason, start ups give people to opportunity to perform my roles and progress rapidly on a professional basis.  But choosing the right start up is no easy task for most people.  Clearly, one of the differentiators amongst start ups is which have received outside investment.   And even among those receiving outside investment, which have received venture capital.  The distinction of venture capital in a start up is significant has it usually indicates both current and future backing based upon the judgment of investment professionals and the completion of extensive diligence.

So where does one look for these jobs in venture capital backed startups?

Try:
StartUpHire

Startup Hire was founded by one of the Grotech General Partners, Steve Fredrick, and has achieved impressive acceptance and sponsorship in a short time frame.  The National Venture Capital Association as well as other marquee groups have put their support behind this effort.

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NVTC's Hot Ticket Awards

Image by mringlein via Flickr

This annual event which recognizes the "Hottest" companies in a variety of categories, including "Hottest Venture Deal", "Hottest Management Team" and "Hottest Buzz" among others, will be held on June 24th this year.   This is a fun, popular event which typically sells out.

Zenoss won "Hottest Venture Deal" last year and LivingSocial is nominated in the same category this year.   Clarabridge is nominated in both the "Hottest Management Team" and "Hottest Buzz" category.  Good luck to both of them. 

Here's a link to the full list of nominees:

Hot Ticket Nominees

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Vesting Employee Stock Options in Start up Companies

From time to time, I will write about some of the terms and conditions of employee stock option plans that can have a major impact for the founder(s) at the end of the day.   Given reader response to my previous blogs on the option subject, I want to call attention to vesting. 

The vesting of stock options over some designated period can have dramatic economic impact for founders.

Vesting

Stock option plans will have a vesting period where the right to purchase the granted stock options increases annually and sometimes monthly.  So the stock optionee gets 1,000 options that vest over a four year period in quarterly amounts, meaning that employee vests and has the right to purchase the options following the completion of each year of employ.  In our example, Employee has the right to buy to 25o options after year one of employment.  The Employee will usually have that right for some period of time so long as they stay in the employ of the company.  It can be up to 10 years to purchase the vested options.

The question arises -- if the founder is the source of the original stock options to supply the stock option pool -- where do ungranted or un-vested options go when the company sells?  Consider an example where the ungranted and granted but un-vested options total 10% of the company at the time of company sale.   These options were all originally the founders' shares.  Where do they typically go at exit?   The custom is for them to divided on a pro rata basis amongst existing shareholders.  So if investors hold 70% of the company and management/founders hold 30%, then the shares will go 70% to the investors and 30% tothe founders/management. 

In this oversimplified example, the issues are obvious.  In real life, the sale frequently occurs after the original option pool has long been exhausted and the bulk of the options are vested to the grantees.  That said, better to be in command of the issue than not.