Venture-Backed Business Plans

The Way Of The VC at Borders, University Ave, Palo Alto

2010-03-05T23:46:00.001-08:00

The Way Of The VC at Borders, University Ave, Palo Alto

I received the following email which is heartening for Singapore's entrepreneurship movement.

---------- Forwarded message ----------
From: (email address removed for confidentiality)
Date: Sat, Mar 6, 2010 at 11:09 AM
Subject: The Way Of The VC at Borders, University Ave
To: yinglantan@stanfordalumni.org

Hi Yinglan,

Hope you have been good. I think we have met during the course of Start-Up@Singapore biz plan competition, for which I was part of the organizing team.

I am now doing an internship under the NUS Overseas College Programme at Silicon Valley, and while I was at Borders in Palo Alto this afternoon, I saw your book on the shelves (See picture below). Way cool!

Regards
(Name removed for confidentiality)

Angels vs. Venture Capitalists

2010-03-01T22:37:00.001-08:00

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Angels vs. Venture Capitalists

via blog.pmarca.com by Ben Horowitz on 3/1/10

[This blog post is by Ben Horowitz, the Horowitz of Andreessen Horowitz.]

At our new venture fund, we've been spending time looking into new ways that will make the lives of entrepreneurs seeking funding easier. To that end, we've linked up with Ted Wang who has been working on an open source legal project called the Series Seed documents. We're impressed with his work and are going to use these standard funding documents as part of our seed stage investments wherever appropriate.

We have to give a big shout out to Ted: he nailed this. It's exactly in step with our intention of letting entrepreneurs focus on building businesses in today's environment, without having to follow old VC rules.

In a nutshell, entrepreneurs and the businesses they are starting have evolved. Start ups today don't need to build a manufacturing plant (as DEC, the very first high-tech VC investment, did in 1957) to start a business. They need less money to build a product and prove that it works before scaling the business. Yet, the paperwork involved in funding entrepreneurs hasn't changed to meet these needs. Series Seed is the first to establish this new way of supporting funding suited for today's entrepreneurs – and we're big fans.

Let us know what you think: check out the Series Seed documents, and share your thoughts.

Here's more background on our thinking behind how entrepreneurship has changed, creating the need for these simplified funding documents. I'm speaking here from the point of view as both an angel investor and a venture capitalist, two very different kinds of investors.

Angels vs. Venture Capitalists

Why do angel investors exist?

Before answering these questions, it's useful to ask and answer a related question: why are there angels and why have they become more prominent in the last 10 years? After all, doesn't the definition of venture capital include all of the activities that angels perform?

The answer lies in the history of technology companies and the differences between how they were built 30 years ago and how they are built now. In the early days of technology venture capital, great firms like Arthur Rock and Kleiner Perkins funded companies like Digital Equipment Corporation (DEC) and Tandem. In those days, building the initial product required a great deal more than a high quality software team. Companies like Tandem had to manufacture their own products. As a result, getting into market with the first idea, meant, among other things, building a factory. Beyond that, almost all technology products required a direct sales force, field engineers, and professional services. A startup might easily employ 50-100 people prior to signing their first customer.

Based on these challenges, startups developed specific requirements for venture capital partners:

Access to large amounts of money to fund the many complex activities
Access to very senior executives such as an experienced head of manufacturing
Access to early adopter customers
Intense, hands-on expert help from the very beginning of the company to avoid serious mistakes

In order to both meet these requirements and build profitable businesses themselves, venture capitalists developed an operating model which is still broadly used today:

Raise a large amount of capital from institutional investors
Assemble a set of experienced partners who can provide hands-on expertise in building the product and then the company
Evaluate each deal very carefully with extensive due diligence and broad partner consensus
Employ strong governance to protect the large amount of capital deployed in each deal. This includes requisite board seats and complex deal terms including the ability to control subsequent financings
Manage own resources effectively by calculating the amount of capital/number of partners/maximum number of board seats per partner to derive the minimum amount of capital that must be invested in each deal

It turns out that building a company has changed quite a bit since the early days of venture-backed technology companies. Building a company like Twitter or Facebook is quite different from building Tandem. Specifically, the risk and cost of building the initial product is dramatically lower. I emphasize product to distinguish it from building the company. Building modern companies is not low risk or low cost: Facebook, for example, faced plenty of competitive and market risks and has raised hundreds of millions of dollars to build their business. But building the initial Facebook product cost well under $1M and did not entail hiring a head of manufacturing or building a factory.

As a result, for a modern startup, funding the initial product can be incompatible with the traditional venture capital model in the following ways:

Lengthy diligence process. Venture capitalists take too long to decide whether or not they want to invest because they are set up to take large risks and have complex processes to evaluate those risks.
Too much capital. Venture capitalists need to put too much capital to work – often a VC will want to invest a minimum of $3M. If you only need 4 people to build the product and get it into market, this likely won't make sense for your business.
Board seat. Venture capitalists often require a board seat and, for that matter, a board of directors be formed. If 100% of the company is building the product and the team knows how to do that, then a board of directors may be overkill. In addition, it may be too early to decide who you want to be on the board.

As a result of the above, a venture capitalist usually requires a serious commitment from the entrepreneur to pursue an idea that is highly experimental. If the product doesn't stick, it might make sense for the entrepreneur to pursue a totally different idea or drop the business altogether. This is much easier to do if you've raised $300,000 than if you've raised $3,000,000.

As entrepreneurs needed someone to bridge the gap between building the initial product and building the company, angel investors stepped up.

Angel investors are typically well-connected, wealthy individuals. They generally use their own money and come with none of the above VC constraints describe above: they don't go on boards, they don't need to put in lots of capital (in fact, they usually don't want to), they prefer dead simple terms (as they often don't have legal support), they understand the experimental nature of the idea, and they can sometimes decide in a single meeting whether or not to invest.

On the other hand, angels do not manage huge pools of capital, so entrepreneurs need to find someone else to fund the building of the company (as opposed to the product) and most angels do not plan to spend a great deal of time helping entrepreneurs build the company.

One more thing before answering the original question

Before getting back to the need for the Series Seed documents, it's important to distinguish venture rounds and angel rounds from venture capitalists and angel investors. It's possible for a venture capitalist to invest in an angel round and vice-versa. Sometimes this is a great idea and sometimes it's tragic. We'll first examine the rounds and then the investors.

When should you raise an angel round and when should you raise a VC round?

This question really comes down to the company's development. If you are a small team building a product with the hope of "seeing if it takes" (with the implication being that you'll try something else if it doesn't), then you don't need a board or a lot of money and an angel round is likely the best option. On the other hand, if you've developed a strong belief in your product or your product idea and you are in a race against time to take the market, then a venture round is more appropriate. You will benefit from both the extra capital and extra support that comes with a serious and large commitment from your investors.

So who is qualified to invest in each?

Obviously angels can invest in angel rounds, but what about VCs? Is it safe to have them participate? The answer turns out to be "if and only if they behave like angels." What does it mean for a VC to behave like an angel? Well, they must:

Be comfortable investing a small amount of money, e.g. $50,000.
Be able to make an investment decision quickly, e.g. in one or two meetings
Be able to invest without taking a board seat
Not require control of subsequent funding rounds
Not impose complex terms

If the VC wants to be in the angel round, but refuses to behave like an angel, then entrepreneur beware. Having a VC who behaves like a VC in the angel round can jeopardize subsequent financings.

Angels can be great participants in venture rounds, but it's generally better to have a VC lead those deals as they have more financial and other resources required to build the company.

What does this mean about Andreessen Horowitz and the types of investments we'll do?

As I stated above, at Andreessen Horowitz, we invest in both venture rounds and angel rounds. When we invest in angel rounds, we behave like an angel. As angel investors, we can invest as little as $50,000, we do not take board seats, and we do not require control.

Rooted in this desire to help germinate quality ideas, our support for Seed Source legal docs will allow both us as investors and the entrepreneurs we fund to focus on building a winning product rather than scrutinizing legal docs.

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Thanks for your support - Book has reached #69,461 (even before formal release)

2010-01-23T17:16:00.001-08:00

The Way of the VC: Having Top Venture Capitalists on Your Board (Hardcover)

Product Details

Hardcover: 288 pages
Publisher: Wiley (February 2, 2010)
Language: English
ISBN-10: 0470824999
ISBN-13: 978-0470824993
Product Dimensions: 9.5 x 6.4 x 1.1 inches
Shipping Weight: 2.2 pounds (View shipping rates and policies)
Amazon.com Sales Rank: #69,461 in Books (See Bestsellers in Books)

--
- Best, Tan Yinglan

The Way Of The VC - Top Venture Capitalists On Your Board (On Amazon)
http://www.tinyurl.com/wayofthevc

Blog: http://www.wayofthevc.com

Featured On Covestor: http://cv.im/models/profile/yinglan-tan

Ubisoft Acquires Singapore-Based Social Game: Pokerama http://bit.ly/7XSKUm

2010-01-14T22:40:00.001-08:00

Cisco Acquired Most Start-Ups In Decade, But Oracle King In ‘09

2010-01-05T19:32:00.001-08:00

Begin with the end in mind.

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Cisco Acquired Most Start-Ups In Decade, But Oracle King In ‘09

via WSJ.com: Venture Capital Dispatch on 1/5/10

Cisco Systems Inc. is king of the "oughts," at least when it comes to acquisitions of venture-backed companies.

According to statistics compiled by venture industry tracker VentureSource, the networking company acquired 48 venture-backed companies from 2000 to 2009, by far the most of any company, despite a notable drop in activity the past two years. International Business Machines Corp. also gave venture capitalists plenty to cheer about in the decade, placing second with 35 deals, while Microsoft Corp. finished third with 30.

Cisco topped the annual venture-backed acquirer list three times - 2000, 2004 and 2007 - but made only two deals each in 2008 and 2009, tying for fourth both of those years. However, like many cash-rich technology companies that have largely minded their wallets during the recession, perhaps believing that acquisition targets were overvalued, Cisco expects to aggressively pursue acquisitions in 2010. That's what executives said last fall after Cisco agreed to buy two publicly traded companies - Starent Networks Corp. and Tandberg ASA - for a combined nearly $6 billion.

On the health care side, Medtronic Inc. acquired the most venture-backed companies in the decade with 11. Johnson & Johnson was second with nine.

In 2009, Oracle proved that it wasn't entirely distracted by its massive planned acquisition of Sun Microsystems Inc., topping the list of venture-backed acquirers with five deals while finishing fifth in the decade with 23. EMC Corp. was second in 2009 with four deals, and Google Inc. and Thomson Reuters Corp. each made three.

Oracle's 2009 venture-backed acquisitions included Conformia Software Inc., a maker of process management software; GoldenGate Software Inc., whose products help businesses tie together data stored in different systems; HyperRoll Inc., a provider of data aggregation software; mValent Inc., provider of configuration management software; and Virtual Iron Software Inc., a seller of server virtualization and management software. None of the terms of those deals were disclosed.

So which company will take home the most VC-backed companies in 2010? The easy money is on the tech giants like Cisco, Google, Microsoft and Oracle, but don't forget Apple, which appears to be stepping up its game with last month's acquisition of online music start-up Lala Media Inc. and today's announced purchase of Quattro Wireless Inc. Then there's Facebook Inc., a much smaller player relative to the others, but it has loads of extra cash and valuable stock that it could use to roll up young Web start-ups like it did with FriendFeed Inc. last summer.

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'Start-up' visas to boost US tech

2010-01-03T00:49:00.001-08:00

Brad, this is great momentum you are generating!

BTW, I am a big admirer of your blog and wanted to send you my book - The Way Of The VC - Top Venture Capitalists On Your Board (http://www.tinyurl.com/wayofthevc). Would you appreciate having a copy and if so, what address should I send it to.

--
- Best, Tan Yinglan

The Way Of The VC - Top Venture Capitalists On Your Board (On Amazon)
http://www.tinyurl.com/wayofthevc

LinkedIn: http://www.linkedin.com/in/yinglantan

Blog: http://www.wayofthevc.com

'Start-up' visas to boost US tech
By Maggie Shiels
Technology reporter, BBC News, Silicon Valley
A proposal that will make it easier for foreign entrepreneurs in the US to
start the next Google or Yahoo will be debated in the new year.
Congressman Jared Polis has proposed a start-up visa to entice "foreigners
with good ideas" to stay in the US.
The issue has been gathering steam in Silicon Valley where half of all tech
company founders are immigrants, according to Duke University research.
The idea is part of a proposed overhaul of the US immigration system.
"Every day the American economy is losing ground - not to mention high-tech
jobs and technologies - to India and China because foreign-born
entrepreneurs cannot secure a visa to stay in the US," he said.
Lost opportunity
Eric Diep, who has just turned 22, could be regarded as one entrepreneur
who got away.
He came to Silicon Valley as a student like many immigrant founders who
have helped start companies such as Google and PayPal.
Mr Diep was one of the first developers to get into social games with his
application called Quizzes, initially launched on the social networking
site Facebook.
Over a year ago he started to apply for a visa to allow him to carry on
working in the Valley, but he soon encountered problems.
"The reason it was so difficult for me was because I dropped out of
university and the stipulation for a lot of visas is undergraduate
experience. My age also seemed to be an issue for the attorneys
"At the beginning it wasn't the expense in terms of legal fees but the big
problem soon became one of distraction. I was trying to spend as much time
working on perfecting my product but then I would have to go away and
figure out the legalities of applying for the visa," Mr Diep told BBC News.
In the end, Mr Diep decided to base himself in his native Canada and travel
back and forth to Silicon Valley.
"The flying is so tiring between the two places and it's expensive. At one
point, I had no money left in my bank account but at the last minute money
came in and now I feel pretty fortunate that I can still do this.
"It was a pretty close call," he added.
He backs a start-up visa because, for him, being in Silicon Valley is where
he needs to be.
"Being there at the time really launched me. I would never have spotted the
social gaming opportunity had I not been there."
Visa details
The start-up visa is aimed at streamlining the country's EB-5 visa system
which was initially introduced in 1990 to attract foreign capital to the
US.
Each year 10,000 EB-5 visas are available but to get one, applicants need
to invest $1m and create 10 full-time jobs.
Mr Polis said he wants "a new class of eligibility" with the start-up visa.
It would be granted to foreign entrepreneurs if their business plan
attracts either $250,000 from a venture capital operating company that is
primarily US based or $100,000 from an angel investor.
They must also show that the business will create five to ten jobs or
generate a profit and at least $1m in revenue.
Some of these requirements may well be changed when the bill goes to
committee in the new year.
"Immigration reform is a big discussion in Washington," said supporter Brad
Feld, who is also a managing director with venture company the Foundry
Group.
"We think the start-up visa is an easy thing to talk about and get
consensus around in terms of having a positive spin on entrepreneurship and
creating jobs."
Job creation
Some critics fear that making it easier for entrepreneurs to set up shop
will hurt Americans by taking jobs away from them.
"I feel incredibly strongly that that is a misinterpretation of the
proposal," said Eric Ries a venture advisor and author.
"Some people have called those opposed to new immigration reform xenophobes
and that is why I think it is important we craft this proposal so it
addresses those concerns. This is not a new visa category but reform of an
existing but flawed category," he told BBC News.
The proposal's backers say that far from taking away jobs, new jobs will
emerge that were never there in the first place.
"If the capital is available for the market, we should jump to bring those
people here. Those jobs only get created once the founders get funded. This
is a market driven decision," said Dave McClure, an internet entrepreneur,
investor and start-up advisor.
YouNoodle is a start-up company founded by two British entrepreneurs. It
tracks the start-up sector and said the figures speak for themselves.
"If just ten thousand start-up visas were made available this would mean
over 3000 additional new innovative and funded companies would be based in
the US every year," said Kirill Makharinsky, YouNoodle co-founder.
"They would generate more than 10,000 jobs on average every year. In the
first 10 years that would add up to over 500,000 highly-skilled new jobs
"So the upside is huge and the downside is negligible because no jobs are
being taken away from US citizens," Mr Makharinsky told BBC News.
And for Mr McClure, the consequences of not establishing a start-up visa
class are obvious.
"We will lose out because we are not being competitive with the rest of the
world," he said.
"There are similar programmes in Canada, the UK and Australia. They are all
vying for the top entrepreneurs and if we only look at our own citizens, we
are only taking 10-20% of the world's talent into consideration here. That
would be short-sighted in the extreme."
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/technology/8417510.stm

Published: 2009/12/31 10:42:35 GMT

© BBC MMIX

Old VC firms with strong track records – e.g. Greylock Partners and Norwest Venture Partners - and new firms with strong pedigrees - Andreessen-Horowitz - continue to have no trouble collecting capital.

2010-01-01T01:48:00.001-08:00

Thefunded.com: Empty vessels make the most noise

2009-12-31T19:49:00.001-08:00

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Thefunded.com: Empty vessels make the most noise

via The coffee shops of Mayfair by PaulFisher on 4/16/08

There's a bit of a hoo-haa right now about the impact of thefunded.com. See here.

I would claim I am in a pretty unique position to comment on this story. For 5 years I worked with a series of start ups with, amongst others things, the job of raising VC for them (Glasses Direct, Reevoo, Rawflow, Zeus, OmniPerception). I negotiated with numerous VCs and sat in hundreds of pitches. Literally.

I have seen the good the bad and the ugly of VCs. Nowadays, on the other side of the fence I see the good, bad and ugly of entrepreneurs.

Adeo Ressi (CEO of thefunded) claims to have two main aims: To make the funding process easier "entrepreneurs should pitch to 10 firms at once, closing in 2 months, having reasonable economic terms. none are true now" (I think this is factually incorrect). Secondly he aims to get a wider breadth of firms funded.

Lofty ideals indeed. Let's analyze the two things he's doing:
1) Giving presentations advising entrepreneurs on how to raise funding
2) Running thefunded.com

Giving Presentations

Giving useful advice to entrepreneurs is great. Especially if it is sage advice from people who've done it before. Even better if its fresh from the current market.

• Lots of what Adeo presents is fundraising 101. It is a useful footnote to the great stuff from the likes of Guy Kawasaki .

• Some of what Adeo presents is good: Stuff like "its OK to walk away from a VC offer you don't like, run fundraising discussions in parallel not in series, try and get multiple offers" etc.

• Some of what Adeo presents is plain wrong. For example the stuff about VCs deliberately trashing companies they want to invest in, or a rule on only ever pitching to general partners.

• Some of what Adeo presents is dangerous. For example "always go for a 20% option pool" or " never give two board seats". All companies are different and this "advice" is woeful.

So my advice to entrepreneurs when listening to Adeo's current presentation on the conference circuit is to listen with interest, don't take it as gospel, and get some advice from someone who really knows what they are doing.

TheFunded.com

This is a vibrant community that aims to help entrepreneurs raise money. That's a great aim. I also like the way its bringing more transparency & visibility to the VC industry which despite all the efforts from VCs (most notably Saul Klein) remains a tough world to get your head round.

My central problem with thefunded is that it doesn't actually help entrepreneurs that much. At best it's something to use after you have made a long list of people to go and talk to. At worst it's a stack of incredibly subjective views that are plain wrong.

Why isn't much use? Accuracy. The wisdom of crowds needs a crowd. The US VC market isn't massive. By comparison, Europe is small.

I will save the long essay till another day, so here are some bullets:

• Some VCs can be very difficult in meetings. This ranges from mild arrogance through to yawning, falling asleep or being proactively obnoxious. Some VCs need to pull their socks up and thefunded.com helps with this.

• However, some VCs see aggressive questioning as part of their selection criteria. Its not my style but I know some VCs, who have helped their entrepreneurs make a lot of money, who aren't the easiest of people to deal with.

• Just because a VC is rude in first meeting, doesn't mean they won't add lots of value when on your board. Being a VC requires a range of skill sets: analyzing strategy, negotiating contracts, making intros, running acquisitions, leveraging brand. The funded.com doesn't give much insight into this.

• One meeting wonders. The problem with thefunded.com is that it gives poor execs who crash after one meeting a disproportionately louder voice than those who have had 2 years of experience. For example, I doubt that the Skype guys have written on the site?

• VCs say "no" more than "yes". Some people simply don't like to be told "no". To quote venturebeat; "VCs say "no" to a lot more entrepreneurs who request backing than they say "yes" to, which suggests the ratio of critical reviewers to positive reviews will be quite high."

• There's a theory in VC land that the noisiest entrepreneurs who complain most about investors "not getting it" are only those who didn't get funded. I wonder if there's a link there….?

So this post has been inspired by a question from Mike Butcher on twitter musing if thefunded would kill the European VC scene.

My response is that there is not a cat in hell's chance.

It's a useful tool in that it gives a bit more visibility to a sometimes impenetrable industry. It's also nice to see a bit more power with the execs.

But it scares me that entrepreneurs will read the funded .com and either believe it to be truly representative or treat it as proper advice. This is very far away from the wisdom of crowds.

Right. I'm off to try and persuade some investee CEOs to stop focusing on executing the business plan and instead write reviews of VCs on thefunded.com (ahem)

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The best friend of a startup is revenues, not VCs.

2009-12-30T04:30:00.001-08:00

A friend of mine told me that a company that he is associated with is tired of talking to VCs and is currently refining their business model and starting to generate revenues.

Good move. The best friend of a startup is revenues, not VCs.

Good VCs are the petrol that you splash on an existing small flame to ignite into an explosion. If there are no revenues, there is no flame at all, so even good VCs are useless.

Codexis Files for $100 Million IPO

2009-12-29T02:38:00.001-08:00

Well Done.

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Codexis Files for $100 Million IPO

via PE Hub News: All News by admin on 12/28/09

NEW YORK (Reuters) - U.S. biotechnology company Codexis Inc filed for an initial public offering of up to $100 million on Monday.

The company provides enzymes and microbes that make industrial processes cleaner and faster.

Its pharmaceutical products are used by drugmakers including Merck & Co Inc (MRK.N), Pfizer Inc (PFE.N) and Dr Reddy's Laboratories Ltd (REDY.BO).

Codexis said it is also working with Royal Dutch Shell (RDSa.L) on biofuel products, and is pursuing the carbon management, water treatment and chemical industries.

Codexis is one of a passel of green technology companies expected to go public this year.

California solar company Solyndra earlier this month filed with the U.S. Securities and Exchange Commission for an IPO of up to $300 million.

Smart grid networking company Silver Spring Networks and electric car maker Tesla have also been eyed as likely candidates for IPOs.

Codexis reported product revenue of $13.4 million in the nine months ended Sept. 30, up from $10.8 million in the same period a year ago. The company reported a net loss of $15.1 million, narrower than its $38.8 million loss from a year ago.

Shareholders include Maxygen Inc, Biomedical Sciences Investment Fund, and funds associated with Shell, CMEA Ventures, FirstMark Capital and CTTV Investments.

The Redwood City, California-based company plans to list on the Nasdaq under the symbol "CDXS." It said it will use proceeds from the offering for working capital and general corporate purposes.

Credit Suisse and Goldman Sachs are set to lead the underwriting syndicate on the deal. (Reporting by Clare Baldwin; Editing by Steve Orlofsky)

peHUB Note: Codexis has raised over $80 million in VC funding from CCTV Investments, CMEA Ventures, Pequot Capital, Pfizer, Maxygen and Bio*One Capital.

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Health Care VCs See Reasons For Exit Optimism As 2010 Nears

2009-12-29T02:37:00.001-08:00

The sector's pulse seems to be improving.

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Health Care VCs See Reasons For Exit Optimism As 2010 Nears

via WSJ.com: Venture Capital Dispatch on 12/28/09

A flurry of acquisitions and the possible opening of an initial public-offering window are giving health-care VCs reason for optimism about exiting prospects in 2010.

With the economy improving, acquirers are striking while valuations remain reasonable. Recently, Johnson & Johnson agreed to buy Acclarent Inc., Cubist Pharmaceuticals Inc. bought Calixa Therapeutics Inc., and Celgene Corp. said it would acquire Gloucester Pharmaceuticals Inc., for example.

Rising stock prices are also stoking public-investor interest in new offerings, some observers contend. Expecting an IPO window next year, a few companies have filed to go public recently, including AVEO Pharmaceuticals Inc., Ironwood Pharmaceuticals Inc. and Aldagen Inc.

Yet investors continue to see M&A as their primary exit option, even for companies that do go public. And many suspect that the recent spate of merger deals will continue into 2010.

One reason is that corporations have plenty of cash, and they are finally willing to spend it. With more than $500 million on its balance sheet, for example, Cubist Pharmaceuticals could well afford the $92.5 million it spent upfront for Calixa Therapeutics. While companies will steer some of their stash to internal research and share buybacks, they'll also use it to stock their pipelines through acquisitions, several investors said.

The activity contrasts with the caution seen early this year. "I can think of big companies that wouldn't let people get on a plane to go to a conference or visit a small company that [could] be acquired," said John Steuart, managing director of Claremont Creek Ventures.

But in 2010, corporations "will look increasingly to small companies as an off balance-sheet source of R&D," he said. "They're going to go on a shopping spree."

Some see a spree happening now. "We have three exits in process right now," said Lisa M. Suennen, managing member of Psilos Group. Each deal, if completed, will return three or more times the firm's money, she said. "For us, it's going to be a great year."

It won't be great for everyone, of course. Suennen sees 2010 as a year of big winners and losers, with the best receiving big buyout bids, and flagging companies staging fire sales. Those in the middle will soldier on and build more value. That may not be the best thing for their backers' IRR, but it could lead to better cash-on-cash returns. "My guess is that everything in the middle will not get done," she said. "If they have the capital, they'd rather wait it out."

Many acquirers making deals over the past year have capitalized on their leverage by structuring agreements with significant earnouts. Cubist's Calixa takeover could rise in value to $402.5 million as the company's drug reaches various milestones, for instance.

As conditions improve, however, some leverage will swing to small companies. While structured acquisitions with earnouts will continue to outnumber other deals, Johnson & Johnson's $785 million cash takeover of Acclarent shows that there is opportunity these days to get a significant sum up front, said Chip Linehan, general partner of Acclarent backer New Enterprise Associates.

Competition from the public markets could spur buyers to make better offers, and some observers see reason to hope that an IPO window will crack open in 2010. The ability of public companies such as Human Genome Sciences Inc. to raise hundreds of millions through new offerings signals that there's strong interest in health care. And with the run-up in share prices, fewer public companies now appear undervalued. As a result, investors are starting to look for value in private companies that they see as comparable to listed ones, said Carl L. Gordon, general partner of OrbiMed Advisors.

But judging from the performance of Omeros Corp., which listed on Nasdaq in October, public investors won't make it easy for early entrants. Omeros, a clinical-stage biotech company with no marketed products, went out at $10 but now trades at $7.50.

Even so, Omeros, now valued at $160 million, got a better valuation by going public than it would have in a venture round, said Andrew Fink, managing director of Omeros backer Trevi Health Ventures. "No one was thrilled to see the stock trade down, but [it's] a pretty big achievement to get this company out, it's a liquid stock," he said.

Biotech prospects these days must do more to pass muster with IPO buyers than they historically have. With Congress striving to revamp the health system to expand health-insurance coverage, companies with products serving unmet needs enjoy a big advantage over those pushing remedies that only improve upon existing treatments, said Tony Gibney, managing director of the health-care investment bank Leerink Swann LLC.

"Very highly priced products are going to start to be more scrutinized," Gibney said. "Products that are not meaningfully differentiated, those are the ones that would narrow the audience of [IPO] participants."

With the capital markets largely closed the past two years, many venture-backed companies have been maturing as private entities and have emerged as good candidates to go public. Yet VCs won't take them all out just because they can. Since the technology bubble burst, most IPOs have been financings only, not liquidity events. That means firms must decide if the step up in valuation is enough to justify the costs a company incurs, and the restrictions shareholders submit to, once a public offering is complete.

Nowadays, the benefits often do not outweigh the drawbacks, some say. "My overall sense of taking companies public is, it really has not been an attractive prospect since 2000," said David Collier, managing director of CMEA Capital. "There's a lot of negatives to weigh in thinking about whether you want to take a company public."

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Cool iPad!

2009-12-29T02:36:00.001-08:00

Sent to you by Tan Yinglan via Google Reader:

10 Features That Would Make iPad A Hit

via GigaOM by Liam Cassidy on 12/29/09

Apple's mythical tablet may or may not be here, but let's indulge in last-minute conjecture on what Apple may have in store. So let's try a thought experiment: a rundown of the ten things that would guarantee that Apple's tablet is an enduring success.

To begin with, I assume we all know what a tablet device is and what it does. Imagine an iPod Touch with a 10-inch screen. I assume, too, that the tablet will run something similar to the touch-flavored OS at the heart of the iPhone; probably iPhone OS 4.0 (which has already been spotted in the wild).

Other lessons will be learned from the iPhone. Sleek industrial design, precious few hardware buttons and oleophobic coatings will feature in the spec sheet. So, too, will accelerometers, magnetometers and flux capacitors.

A cautionary note; despite assertions from unnamed Apple execs that we're going to be "very surprised" by how we interact with the tablet, take it from an old cynic: it will be nothing like Apple's 1987 Knowledge Navigator concept device (seen below). It might be similar in form factor, but I guarantee the Tablet has more in common with Apple's venerable Newton than it does the crazily-ambitious platonic paradigm that was the Navigator.

Mag+ from Bonnier on Vimeo.

So with that out of the way, let's get started with the 10 prescriptions for guaranteed tablet success for Apple, in reverse order:

10. OLED Display I'm sure we won't get this, and that's a shame. Sure, we'll still get HD resolution with an LCD, but the battery will suffer.

09. High-Definition Prowess HD is crucial; 720p natively, 1080p via external screen. It has to manage at least three hours of continuous HD playback on a single battery charge.

08. eMagazine Reader eBook readers are greyscale and dull. An eMagazine Reader offers colors, animations and adventure. (Plus you can get automatic content delivery via iTunes subscriptions.) The concept below is by Bonnier R&D.

Mag+ from Bonnier on Vimeo.

07. Ubiquitous Connectivity Sounds fancy, but it's just a 3G radio for connecting to the Net. For an added awesome factor, let's do it WhisperNet style, with no monthly 3G fees. (Never gonna happen, but what a wonderful dream!)

06. Cameras That's right, cameras is deliberately plural. One on the back and one embedded up-front for video iChat. Anything less than 5 megapixels, by the way, is criminal.

05. Touch Media You know what we want here – multimedia creation, editing and consumption, all touch-friendly. The retrofitted iPhone's iPod app just won't cut it — what we need is a touch-based iTunes. And a touch-friendly iMovie would be very welcome.

04. Multitasking We need real background processes, Apple. No excuses this time.

03. Awesome Battery My dream in terms of battery life would be five days between full charges. But, realistically, this being a first generation device, the battery will probably be weak.

02. Apps Actually, apps are doomed. HTML5 will see to that, eventually. Until then, Apple's tablet needs to run all the apps already in the iTunes store. Even the fart apps.

So, from an HD screen, Internet connectivity, incredible battery life and support for software to more factors, there are many things needed to make the iTablet a success. What's the one killer feature that will guarantee Apple's tablet huge and sustainable success?

01. Price It comes down to this. Most sane people will not buy a tablet if they can get a notebook (or an iPod Touch!) that does all the same stuff at a lower price.

Of course, Apple may have already considered these things, and there are many other aspects of the iTablet that people are hoping for. While I'm sure we won't get even half of these wish list (though perfectly reasonable) features, when Steve Jobs eventually makes the much-anticipated tablet announcement, he may convince many people that they need a tablet. If that happens, just check this list again for a brief reality check before reaching for your credit card.

Photo courtesy of Gizmodo. Photo rendering by Jesus Diaz.

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创始人物种研究：创业板30vs纳斯达克30

2009-12-29T02:34:00.001-08:00

How does the NASDAQ and China's NASDAQ stack up? China NASDAQ is winning so far.

Sent to you by Tan Yinglan via Google Reader:

创始人物种研究：创业板30vs纳斯达克30

via ReachVC Venture Capital 风险投资专家 by RVC@ReachVC.com (reachvc) on 12/28/09

在上市五年之后，纳斯达克30的创始人出现了不同的结局：有的在战略上失败了，他们中的一些人也被迫离开了原来的企业，比如新浪的王志东，UT斯达康的吴鹰等；有的功成身退，比如空中网杨宁和周云帆等；也有的转型做起了投资者，如沈南鹏、唐越、杨镭等。

即使对于百度、盛大、网易、搜狐、携程等这些已历经考验，并获得巨大成功的纳斯达克上市企业及其创业家们来说，能否像微软的盖茨、苹果的乔布斯、亚马逊的贝索斯那样，以长跑的心态，持续奋斗，将他们的企业带到一个难以想象的伟大境界，使其成为令国人自豪的世界级企业呢？

继续阅读《创始人物种研究：创业板30vs纳斯达克30》的全文内容...

分类: 案例 | Tags: 创始人创业板 IPO | 添加评论(0)

风险投资基金的运作模式 (2009-12-24 14:57:54)

创业板的钱怎么花 (2009-12-22 16:8:52)

准备撤退！在创业板中晕掉的风投 (2009-12-19 20:37:15)

规避"10号文"红筹系列六：瑞金矿业 (2009-12-17 20:0:9)

创始人流动性 (2009-12-16 13:12:38)

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Mark Zuckerberg of Facebook

2009-12-24T05:29:00.001-08:00

If there is one thing you should know about Mark Zuckerberg, it's that you shouldn't second-guess him. It hasn't always been easy to heed that advice during his company's astronomical rise. He had an opportunity to become fabulously wealthy at the age of 22, when Yahoo offered to buy Facebook—which he still owns roughly 30 percent of—for $1 billion. He turned it down. Three years later, the Harvard dropout's company is worth 5 to 10 times more. He has radically changed the design of his social network—first to include users outside of academic institutions, then to de-emphasize activities he deemed less interesting than others, and ultimately to look a lot more like another hot social site, Twitter. Millions of users protested every step, using the very tools he created to threaten a mass exodus. He has stayed the course, and his site now boasts more than 300 million members, who spend more time on Facebook than any other destination on the Web. Like tech titans before him, Mark Zuckerberg is guided by the fundamental belief that he is right. And that conviction has alienated many of those around him—virtually the entire core team that surrounded Zuckerberg at Facebook's founding has since parted ways. But now, the kid whose business card once famously read "I'm CEO, Bitch" sits atop the most significant Internet company to emerge since Google. And that's in no small part a result of ignoring those who second-guessed him.

--
- Best, Tan Yinglan

(BN) Twitter Is Said to Be Profitable After Gaining $25 Million in Search Deals

2009-12-21T22:10:00.001-08:00

Bloomberg News, sent from my iPhone.

Twitter Is Said to Be Profitable After Making Search Agreements

Dec. 21 (Bloomberg) -- Twitter Inc. will make about $25 million from Internet-search deals with Google Inc. and Microsoft Corp. announced in October, enough to push the site into profitability, people familiar with the matter said.

An agreement that made Twitter's messages searchable on Google's site will generate about $15 million, said the people, who asked to remain anonymous because the terms aren't public. A similar deal with Microsoft's Bing search engine will earn Twitter about $10 million.

The multiyear agreements will allow Twitter to make a small profit in 2009, said the people, who estimate that its operating costs are about $20 million to $25 million a year. The San Francisco-based company, which started in 2006, has about 105 employees, according to its Web site.

Until earlier this year, Twitter wasn't even focused on revenue -- let alone profit. The company attracted millions of users with a free service that posts 140-character messages, known as tweets. Chief Executive Officer Evan Williams said two months ago that the company was spending almost all its time improving the product, rather than seeking ways to make money.

That left many analysts and investors wondering how Twitter would convert its popularity into earnings. Twitter has more than 58 million global monthly users, according to ComScore Inc., a research firm in Reston, Virginia. The service is the third most popular social-networking site in the U.S., after Facebook Inc. and News Corp.'s MySpace.

No Comment

The company's co-founder, Biz Stone, declined to comment on its finances, saying only that Twitter is proud of the work it accomplished in 2009.

"We're thrilled about the partnerships we've formed this year and we're looking forward to opening Twitter even more in the future," Stone said in an e-mail.

Jane Penner, a spokeswoman for Mountain View, California- based Google, declined to comment, as did Pete Wootton, a spokesman for Redmond, Washington-based Microsoft. When the agreements were announced in October, none of the companies involved disclosed their value.

Twitter got help achieving profitability by reducing expenses, the people familiar with the situation said. The company used to pay more money to telecommunications companies for distributing its billions of tweets over wireless networks. Twitter's popularity has given it bargaining power with phone companies, helping it renegotiate deals to bring down costs.

Workforce Costs

While telecommunication fees used to be the company's single largest expense, employees are now the biggest line item, said one of the people. That means maintaining profitability will depend on whether Twitter keeps a lid on the size of its workforce.

The payments from Google and Microsoft underscore the growing value of the data coursing through Twitter's network. Executives of both companies have said their search sites would be considered incomplete if they didn't include the millions of messages that get posted on Twitter every minute.

"We believe that our search results and user experience will greatly benefit from the inclusion of this up-to-the-minute data," Marissa Mayer, Google's vice president in charge of search products, said in a blog posting after the deals with Twitter were announced. "The next time you search for something that can be aided by a real-time observation, say, snow conditions at your favorite ski resort, you'll find tweets from other users who are there."

Consumer Tweets

Tweets also are a source of product information, with shoppers using Twitter to share views on their purchases. Making that kind of information available on Google and Bing may help them sell more advertising, and provide more relevant search results to shoppers.

Twitter, which started in 2006, has raised about $155 million in venture capital. A round in September for $100 million valued the company at $1 billion, according to a person familiar with the deal. The size of the valuation, along with Twitter's lack of a revenue plan, was reminiscent of the dot-com era, David Garrity, principal at GVA Research LLC in New York, said at the time.

Since then, Twitter has given more details about how it plans to make money. In addition to the search deals, it's planning an advertising program for early next year. The company also will charge for commercial Twitter accounts, which would let businesses analyze tweet traffic.

Chief Operating Officer Dick Costolo, who joined Twitter in September, was key to getting the search-engine deals done, one person familiar with the matter said. Costolo helped found FeedBurner and worked at Google as an ad product manager after his company was acquired.

At FeedBurner, Costolo worked on selling ads on Web news feeds. The goal at Twitter now is to add advertising without disrupting the way Twitter works, Costolo said last month at a conference.

"We want to do something that's organic and in the flow of the way people already use Twitter -- and not, 'Here's the tweets and here are the ads,'" he said.

To contact the reporters on this story: Spencer E. Ante in New York at sante1@bloomberg.net

Find out more about Bloomberg for iPhone: http://bbiphone.bloomberg.com/iphone

Best,

Daryl Tan

--
- Best, Tan Yinglan

Way Of The VC - Merry Christmas and a Happy New Year

2009-12-19T02:02:00.001-08:00

Merry Christmas and a Happy New Year!

We have moved to revamped website at http://www.wayofthevc.com.
(Please update your bookmarks. )
Our Facebook Fan Page (http://www.tinyurl.com/wayofvc)
Twitter (http://www.twitter.com/yinglantan)
Amazon (http://www.tinyurl.com/wayofthevc)

Funding Opportunity: Those looking for a personal loan for their venture, can check this highly-recommended lending club, have recommended a few people there who have given great feedback on the quality of service (You can try our referral code (wayofthevc) to get $60 credit)

These are the ventures which have approached Way Of The VC for funding assistance:

One-Stop Publishing Service
China's payment portal
China's leading sports retail portal
One stop solution for web server and application solution
Online ID, a single phone number for contact
Meta Social Network for all your social networks
Online ticketing agent in the same way as OpenTable
Apparel Supply Chain Intelligence
Mobile Food ordering platform
Real estate investments in Brazil and other opportunities
New Fashion brand
Delivery of diesel for generators
Twitter Product Crowdsourcing
Local Craiglist.
Design/diagramming tool set

Those with interest to find out more about the opportunities, pls contact me:
http://www.wayofthevc.com/2009/09/contact-me.html

May I also invite you to participate in our Way Of The VC - Innovator of The Week Contest. You submit your story. I pick two finalists every week. Everyone votes. And the winner goes into my next book - The Way Of The Innovator.

Not to mention you get to profile yourself/your company to thousands of venture capitalists, angels and potential customers.

All entries also get a complimentary best-selling "Secrets Of Venture Capital - Beat the Odds on Fund-raising" e-book. Winner Of the week gets a complimentary personal introduction to a top-tier VC and a complimentary Ernst & Young Global VC Report.

Submit your story here:

http://www.wayofthevc.com/2009/11/way-of-vc-contest.html

Synopsis of my next book "The Way Of The Innovator" below: There are >1 billion companies and there are only the top 1 percent which are any innovative. What is the path that an innovative venture-backed enterprise take? What are the experiences, capabilities that these innovative companies acquire? What is the DNA of these companies? How do these companies experiment with innovative approaches and also manage the risk of innovation? What are the lessons learnt and how would these entrepreneurial innovators advise others who are embarking on the same journey.

Support some of our finalists:
http://www.wayofthevc.com/2009/12/way-of-vc-contest-aplpcocom_04.html

http://www.wayofthevc.com/2009/12/way-of-vc-gas-technologies_04.html

http://www.wayofthevc.com/2009/11/way-of-vc-contest-wk-1-red-molecule.html

Posts

Mobile Internet Report - Morgan Stanley

http://www.wayofthevc.com/2009/12/mobile-internet-report-ms.html

Venture Capitalist begins a fund of funds

http://www.wayofthevc.com/2009/12/venture-capitalist-begins-fund-of-funds.html

Another startup wants to democratize investment

http://www.wayofthevc.com/2009/12/covestor-another-start-up-wants-to.html

Stock Exchange for Charities

http://www.wayofthevc.com/2009/11/stock-exchange-for-charities.html

Deal Of the Week: To get a loan, try lendingclub.com ((You can try our referral code (wayofthevc) to get $60 credit)

Exit of the Week: It's Christmas - Lets take a break.

Quote of the week: I love it when entrepreneurs tell me: This is my opinion, what do you think?

Yinglan
Way Of The VC

--
- Tan Yinglan
The Way of the VC: Having Top Venture Capitalists on Your Board (On
Amazon)
http://tinyurl.com/wayofthevc

We would like to thank our sponsor: Lending Club
www.lendingclub.com ((You can try our referral code (wayofthevc) to get $40 credit)

Featured App of the Week:
www.covestor.com: Coinvest with the best. Catch Tan Yinglan as a featured model investor. Stay tuned.

Featured App of the week
ww.vinculumventures.com: Find funding for your business fast!

Best, Yinglan

The Way Of The VC - Top Venture Capitalists On Your Board (On Amazon)

www.tinyurl.com/wayofthevc

--
- Best, Tan Yinglan

The Mobile Internet Report - MS

2009-12-15T23:34:00.001-08:00

http://www.scribd.com/doc/24129386/The-Mobile-Internet-Report

Morgan Stanley's global technology and telecom analysts set out to do a deep dive into the rapidly changing mobile Internet market. We wanted to create a data-rich, theme-based framework for thinking about how the market may develop. We intend to expand and edit the framework as the market evolves. A lot has changed since we published "The Internet Report" in 1995 on the web.

We decided to create The Mobile Internet Report largely in PowerPoint and publish it on the web, expecting that bits and pieces of it will be cut / pasted / redistributed and debated / dismissed / lauded. Our goal is to get our thoughts and data into the conversation about what may be the biggest technology trend ever, one that may help make us all more informed in ways that are unique to the web circa 2009, and beyond.

--
- Best, Tan Yinglan

Smart Cities

2009-12-14T19:18:00.001-08:00

Dec 11, 2009
Smart cities: Not only about clean air
By Joel Kotkin

IN TODAY'S parlance, a 'smart' city often refers to a place with a 'green'
sustainable agenda. Yet this narrow definition of intelligence ignores many
other factors - notably upward mobility and economic progress - that have
characterised successful cities in the past.

The green-only litmus test dictates cities should emulate either places
with less-than-dynamic economies, like Portland, Oregon or Honolulu, or one
of the rather homogeneous and staid Scandina- vian capitals. In contrast, I
have determined my 'smartest' cities by looking at not only infrastructure
and liveability, but also economic fundamentals.

These criteria unfortunately exclude mega-cities like New York, Mexico
City, Tokyo or Sao Paulo, which suffer from congenital congestion,
out-of-control real estate prices and expanding income disparities -
symptoms of what urban historian Lewis Mumford described as 'megalopolitan
elephantiasis'.

Instead, today's 'smart' cities tend to be smaller, compact and more
efficient: places like Amsterdam, Seattle, Singapore, Curitiba and
Monterrey. This is not an entirely new notion: Between the 14th and 18th
centuries, modest-sized cities like Venice, Antwerp and Amsterdam nurtured
modern capitalism and created canals and vibrant urban quarters that remain
wonders even today. In the Pacific- centric modern era, smart commercial
cities are increasingly found outside Europe. Indeed, the most likely
21st-century successor to 15th-century Venice is Singapore, a commercially
minded island nation that, like its forebear, is run by an often
enlightened authoritarian regime.

When it first achieved independence in 1965, Singapore's condition was
comparable to other developing cities like Mumbai, Cairo, Lagos or Kolkata.
The island city's neighbours included unstable countries like Vietnam,
Malaysia and Thailand. Its gross domestic product (GDP) per capita ranked
well below that of Argentina, Trinidad, Greece and Mexico.

The country's first prime minister and current eminence grise, Mr Lee Kuan
Yew, was determined to change reality. Today, Singapore, with a population
of less than five million, boasts an income level close to the wealthiest
Western countries and a per-capita GDP ahead of most of Europe and all of
Latin America. Once largely semi-literate, its population is now among the
best-educated in Asia.

To be sure, this enviable achievement was accomplished in an authoritarian
fashion, but much of what Singapore has done must be considered 'smart' by
any reasonable accounting. Strategic investments taking advantage of its
location between the Indian and Pacific Oceans have paid off handsomely:
Today, Singapore's Changi Airport is Asia's fifth-largest, and the city's
port ranks as the largest container entrepot and is the second-biggest in
the world, after Shanghai, in terms of cargo volume.

All these have made Singapore a huge lure for foreign companies, with more
than 6,000 multinationals, including 3,600 regional headquarters, now
located there. For foreign managers, engineers and scientists, largely
English-speaking Singapore offers a pleasant and predictable environment,
particularly when compared with other Asian centres.

At least one recent survey, by the World Bank's International Finance
Corporation, rates Singapore No. 1 in the world for ease of doing business.
Though its growth has been slowed by the recession, the city's close ties
to the resurgent economies of South-east Asia, China and India lead many
forecasters to predict a strong recovery over the next year.

Hong Kong, yet another outpost of British imperialism, has also performed
well. Last year, the World Bank ranked the area No. 3 for ease of doing
business, compared with No. 89 for the rest of China. As long as Chinese
communists allow wider freedoms in Hong Kong than in the mainland, the area
should continue to take advantage of its basic assets, including the
world's third-largest container port, an excellent airport and a highly
skilled entrepreneurial population.

The continuing appeal of Hong Kong was vindicated by the recent decision of
HSBC chief executive Michael Geoghegan to relocate there from London. As
the centre of the world economy continues to shift to Asia while Europe and
America struggle, he is likely to find more company.

Not all the world's 'smart' cities are trading giants like Hong Kong and
Singapore. They also include well-run metropolises, such as the city of
Curitiba. The south Brazilian city is regarded as an innovator in
everything from bus-based rapid transit, used by some 70 per cent of
residents, to its balanced, diverse economic development strategy.

With a population of 3.5 million, Curitiba demonstrates how to achieve the
evolving Brazilian dream without the mass violence, transportation
dysfunction and ubiquitous grinding poverty that plague many other Latin
American metro areas. The city's programme of building 'lighthouses' -
essentially electronic libraries - for poorer residents has become a model
for developing cities worldwide. These are among the reasons Reader's
Digest recently named Curitiba the best place to live in Brazil.

Another similarly 'smart' city in the developing world is Monterrey,
Mexico, which has emerged from relative obscurity and turned itself into a
major industrial and engineering centre over the past few decades. The city
of 3.5 million sits adjacent to the dynamic United States-Mexico border
region and has 57 industrial parks specialising in everything from
chemicals and cement to telecommunications and industrial machinery.

Over the last decade, the area has consistently grown at a faster rate than
the rest of Mexico - or, for that matter, the US. Monterrey and its
surrounding state, Nuevo Leon, now boast per-capita GDP roughly twice that
of the rest of Mexico.

Although hard hit by the current recession, Monterrey seems poised for an
eventual recovery. Dominated by powerful industrial families, the area has
long been business-friendly. It has also become a major education centre,
with over 82 institutions of higher learning and 125,000 students, led by
the Instituto Technologico de Monterrey, considered by some to be Mexico's
equivalent of the Massachusetts Institute of Technology or the California
Institute of Technology.

Of course, 'smart' cities also exist in the advanced industrial world.

Amsterdam, a longstanding financial and trading capital, is home to seven
of the world's top 500 companies, including Philips and ING. Relatively low
corporate taxes and income taxes on foreign workers attract individuals and
companies - one reason why, last year, the Netherlands was the largest
recipient of American investment in Europe. Amsterdam's advantages include
a well-educated, multilingual population and a lack of political
corruption.

Amsterdam's relatively small population - 740,000 in the city and 1.2
million for the entire metropolitan area - belies its strategic location in
the heart of Europe and proximity to the continent's dominant port,
Rotterdam. The city's Schiphol airport, Europe's third-busiest, is only 20
minutes from the centre of Amsterdam, a mere jaunt compared with commutes
to the major London or Paris airports. Schiphol has also spawned a series
of economically vibrant 'edge cities' that appear like more
transit-friendly versions of Houston or Orange County, California.

North America also has its share of smart cities. Although self-obsessed
greens might see their policies as the key to the area's success, Seattle's
growth really stems more from economic reality. In this sense, its boom has
a lot to do with luck - it is the closest major US port to the Asia-Pacific
region, which has allowed it to foster growing trade with Asia.
Furthermore, its proximity to Washington state's vast hydropower generation
resources - ironically the legacy of the pre-green era - assures access to
affordable, stable electricity. The area also serves as a conduit for many
of the exportable agricultural and industrial products produced both in the
Pacific north-west and in the vast, resource-rich northern Great Plains,
linked to the region by highways and freight rails.

As North America's economy shifts from import and consumption towards
export and production, Seattle's rise will be a model for other
business-savvy cities in the West and South. Houston's close ties to the
Caribbean, as well as its dominant global energy industry, thriving
industrial base, huge Texas Medical Centre complex and first-rate airport,
all work to its long-term advantage. Arguably the healthiest economically
of America's big cities, Houston is also investing in - not just talking
about - its green future; last year, it was the nation's largest municipal
purchaser of wind energy.

Another smart town poised to take advantage of an industrial expansion is
Charleston, South Carolina, which has expanded its port and manufacturing
base while preserving its lovely historic core. Once an industrial
backwater, Charleston now seems set to emerge as a major aerospace centre
with a new Boeing 787 assembly plant, which will bring upwards of 12,000
well-paying jobs to the region.

Further inland, Huntsville, Alabama, has long had a 'smart' core to its
economy - a legacy of its critical role in the Nasa ballistic missile
programme. Today, the area's traditional emphasis on aerospace has been
joined by bold moves into such fields as biotechnology. Publisher Kiplinger
recently ranked the area's economy No. 1 in the nation.

With the likely rise in commodity prices over the next decade, Canada also
seems likely to produce several successful cities. Perhaps the best
positioned is Calgary, Alberta. Over the past two decades, the city's share
of corporate headquarters has doubled to 15 per cent, the largest
percentage of main offices per capita in Canada. Although last year's
plunge in oil prices hit hard, rising demand for commodities in Asia should
help revive the Albertan economy by next year.

In their press statements, all these cities make a point of bragging about
being green and environmentally conscious. Yet they have demonstrated their
'intelligence' in other ways - by exploiting their locations and resources
to make savvy business and development decisions. At the end of the day, it
will not be their clean air but their commercial prowess - as has been the
case in history - that will sustain their success in the decades ahead.

The writer is executive editor of NewGeography.com and is a distinguished
presidential fellow in urban futures at Chapman University in California.
He is author of The City: A Global History.

FORBES MAGAZINE
------------------------------

--------------------------------------------------

'Smartest' cities in the world
Singapore
Hong Kong
Curitiba, Brazil
Monterrey, Mexico
Amsterdam, the Netherlands
Seattle, the United States
Houston, US
Charleston, South Carolina, US
Huntsville, Alabama, US
Calgary, Alberta, Canada

--
- Best, Tan Yinglan

A Venture Capitalist Begins a Fund of Funds

2009-12-14T05:41:00.001-08:00

A Venture Capitalist Begins a Fund of Funds

By CLAIRE CAIN MILLER

Like many businesses these days, university endowments and state pension funds are stretched thin, short on staff and more in need than ever of good research to guide their investing.

A venture capitalist has started a new fund of funds to help these institutional investors — known in the industry as limited partners — to outsource their investing in venture capital and other types of funds.

The formation of the new fund, called Cendana Capital, was announced Monday by Michael Kim, a founder of the venture capital firm Rustic Canyon Partners. For the past few years, he has also been chairman of the investment committee of a $13 billion San Francisco pension fund, so he knows first-hand the challenges of investing in this economy.

"Public funds are in trouble right now because they're not generating the returns and they have a legal obligation to pay the benefits for their employees," Mr. Kim said.

As The Times has written previously, many people in the venture capital industry are calling for a back-to-basics approach in which small funds of only a couple hundred million dollars apiece make small investments in very early-stage companies. Several firms, including Union Square Ventures,Foundry Group and First Round Capital, are doing this.

The problem is that public pension funds have huge pots of money that they need to invest and fewer analysts than ever to research these investments. As a result, they cannot invest $20 million in several small venture funds. Instead, they need to invest $100 million in one big fund.

When Foundry Group was raising its most recent fund of $225 million in 2007, for instance, one state fund wanted to invest $100 million. Foundry had to reject the money because it did not want to accept more than $40 million from any investor in order to keep the fund small, said Jason Mendelson, a managing director of the firm.

That is one of the problems that Mr. Kim aims to solve. "As public funds seek better returns, but don't have the staff or notion of how to build an alternative investment program, a fund of funds is a good way to enter the market," he said.

Cendana will invest the limited partners' money in these types of small funds. It will also invest in other types of funds, including distressed debt and buyout funds, particularly those that are smaller and focusing on unusual areas, like family-owned companies in the Southwest. That variety is important, Mr. Kim said, because investing is cyclical, with certain types of funds performing better in some years than others.

Right now, he said, distressed debt is more attractive than venture capital, which has recently had lackluster returns. "Part of the reason the V.C. model is broken is the returns haven't been there but funds have gotten larger and larger," he said.

--
- Best, Tan Yinglan

Are you an introvert?

2009-12-12T21:40:00.001-08:00

It has been reported that a full 40% of executives describe themselves as introverts, including Microsoft's ( MSFT - news - people ) Bill Gates, the über-investors Warren Buffett and Charles Schwab, Avon's chief executive, Andrea Jung, and the late publishing giant Katharine Graham.
They draw on important strengths that extroverts may not have. Read more at Forbes.com
http://www.forbes.com/2009/11/30/introverts-good-leaders-leadership-managing-personality.html?partner=leadership_newsletter

--
- Best, Tan Yinglan

Covestor - Another Start-Up Wants to Democratize Investing

2009-12-09T09:50:00.000-08:00

""It's the way of the future," said Albert Wenger, a partner at Union Square Ventures, which has invested in Covestor along with Spark Capital and Amadeus Capital Partners. "It's motivated by best performance and not ulterior motives" that might come along with traditional asset management firms that are less transparent, he said."

December 9, 2009, 11:10 AM

Another Start-Up Wants to Democratize Investing

By CLAIRE CAIN MILLER

Generally, when people look for money managers to help them invest their savings, they are limited to hiring people who do that professionally.

But there are many people who invest as a hobby, and some of them are quite good. A start-up called Covestor is making it possible for people to use them as money managers instead of the professionals.

"In the last few years, the world has really flattened, and investors have the same access and tools as pros, but I can't invest alongside them," said Perry Blacher, Covestor's chief executive. "I have to invest alongside someone who gets paid fees whether or not he does a good job." Covestor changes that by letting people choose whose investment model they want to follow, he said.

Here's how it works. Covestor, which was founded in 2006, has always let investors post their portfolios so other people could view them and copy their trades, and 25,000 investors have done so. Now, customers can open a brokerage account with either Interactive Brokers or TD Ameritrade and link their account to Covestor. Then, any time one of the investors they choose to follow makes a trade, the same trade is automatically made in their own account.

"It's the way of the future," said Albert Wenger, a partner at Union Square Ventures, which has invested in Covestor along with Spark Capital and Amadeus Capital Partners. "It's motivated by best performance and not ulterior motives" that might come along with traditional asset management firms that are less transparent, he said.

We have covered another start-up that offers this, called KaChing. The main difference is that on KaChing, people can follow only certain investors who meet KaChing's standards, which are based on risk-adjusted returns, whether investors stick to their strategies and the quality of the research they provide to explain their ideas.

On Covestor, on the other hand, people can follow almost any investor. The only limits are that the investor have a year-long history on the site and trade within the rules, which include avoiding illegal behavior, like pumping and dumping shares of a certain company, and sticking to companies with at least a $50 million market capitalization and a minimum daily trading volume.

Covestor charges a management fee of between 0.5 percent and 2.5 percent, based on the risk of the investment model. There are no entry or exit fees or trade commissions. They pay the investors a portion of the fee.

--
- Best, Tan Yinglan

Way Of The VC Contest - Aplpco.com

2009-12-04T21:32:00.003-08:00

Rudy Preciado, Aplpco.com

Brief Profile of Entrepreneur / Venture.
Scenario: You are looking to purchase a red scooter, your in a car, out an about, or some location you are normally not accustomed to, you pull out your mobile phone, you click this downloaded application an type in your search criteria. The top 5 locations pop up with best price nearest to you. You can interact with them directly or indirectly, depending on your preference. You can either purchase those items & pick it up directly, or allow sellers to bid on your business. You accept the last price and pick up your item. You found your red scooter at the best valued price.

How is your product a breakthrough or disruptively innovative?
Real time, placing buyers & sellers near to each other. Exclusive marketing opportunities.

Given 20-20 hindsight, what would you do differently?
Surround yourself with people smarter than yourself.

What is your most memorable fund-raising experience?
One to one pitch with two people who were early stage VC's, and they drilled me on something I was barely putting together while looking for seed funds. They drilled me, drilled me, ask what I wanted, drilled me, and then said you are on to something ! Talk to us again later.
--
- Best, Tan Yinglan

--
- Best, Tan Yinglan

Way Of The VC - Gas Technologies

2009-12-04T21:32:00.001-08:00

Walter Breidenstein， CEO of Gas Technologies:

Brief Profile of Entrepreneur / Venture.
In my experience, the entrepreneur and innovator needs to have broad vision, courage, high tolerance for risk and managing risk, the ability to cover the downside so that when they reach the middle of the valley of death in their venture they don't break down and walk away, and the patience to deal with money sources who don't care about your sleepless labors without Wall Street bailout returns. The entrepreneur and innovator must always be at the top of his game when abounding in the hills or when abased in the valley. There is no excuse for not delivering constant excellence, passion and true grit for the entrepreneur. He must learn to travel the world on a shoe string budget just as easy as he can with a bulging bank account. He must feel comfortable in 5 star resorts, and learn to sacrifice what is like to barter a couple nights hotel lodging to meet a budget if needed.

Is this type of entrepreneur and innovator still existing in our society? Read the books of the great industrialists and business leaders over the past 300 years and you will find this 1% out there in the historical record. However, I see these 1% true entrepreneurs and innovators being replaced by the modern entrepreneur who is funded with millions of VC dollars out of University, and how things have indeed changed. The real scrapper and street fighter entrepreneur has been replaced by the VC backed manager/employee and yet they have redefined the definition of entrepreneur and innovator.

How difficult is it to manage $2-5 million cash to build a company? Well, in 1999 during my first trip to Silicon Valley I saw what "entrepreneurs" called their burn rate of $2-5 million per month, and if you did not have that sort of burn rate you were not a true entrepreneur or innovator. Some spent more of other people's money, some spent less...but that was the litmus test and if you did not have a solid burn rate you were not "VC material".

Well, the times have changed again. Now, the litmus test is total money invested. How much money have you spent to-date as an entrepreneur to innovate and build value? If you want to be a truly disruptive (old term) technology you should have spent at least $10 million, and if you can pick up a licensed technology from a global giant to continue innovation, it would be great if they spent $100+ million. I recently saw a total $165 million total raise go into a technology which really has no chance to ever make money as an innovation, but the money follows the money to keep everyone "floating" before another crash.

Why would you recommend me or my service? Value and old fashion entrepreneurial work ethic comes to mind. Straightforwardness which can be hard for an entrepreneur as there is a very fine balance between appeasing those who manage other people's money and oneself who manages their own at constant risk. I would seek out the entrepreneur who is not necessarily handed several million out of college or leaves a fortune 500, but the 1% who have had to examine thousands of technologies and selected the 2-3 that will change the world in a specific sector.

How is your product a breakthrough or disruptively innovative?
With a total investment of ~$1.5 million dollars, I have managed to move the technology into competition (or collaboration) with multiple global energy companies.

There is sufficient evidence to demonstrate that our technology is worth tens of millions, if not hundreds of millions, due to our global patent coverage over our competitors. Who are the competitors? Which companies below would be potential buyers or licensors of our truly disruptive innovation?

Below is a list of companies where we have, or had, discussions on our technology and that are either competitors or potential collaborators.

Total Petrochemical: Total has nearly 97,000 employees' worldwide and posted sales of €179.9 billion in 2008.

Shell GameChanger: In September and October of 2009, Shell Energy Company posted on the front page of their website a challenge, "The world's rising global energy demand means we're going to need every type of energy… and can't afford to leave this valuable resource behind. At Shell, we're looking for new ideas on ways to access and transport stranded gas and get it from where it is to where it's needed. If you have the bright idea we're looking for, Shell GameChanger could help turn it into reality with financial investment and the technical support you need to take your proposal to proof-of-concept stage. After that, Shell could continue to work with you to take your idea further, or help you find partners for the next stage of development." Shell has 102,000 employees in more than 100 countries and territories, has revenues of $458.4 billion in 2008, and investment in research and development: over $1.2 billion (more than any other oil major).

BP International: BP has been one of the most active investors into R&D on methane conversion worldwide, and recently announced their new GTL process technology commercialization in Alaska. BP is one of the world's largest oil and gas companies with 92,000 employees, $361 billion in sales ending 2008, and is a leading player in the global biofuels market. Since 2006, BP has announced investments of more than $1.5 billion in biofuels research, development and operations.

ExxonMobil Chemical: Exxon is world's largest traded international oil and gas company with $477.4 billion in sales and 79,900 employees.

DOE/University of Virginia: On May 5, 2009 the University of Virginia, California Institute of Technology, Princeton University, the University of California-Berkeley, the University of Maryland, Iowa State University, the University of North Carolina, North Texas University, Yale University and Scripps Research Institute-Florida received an $11 million grant for methane-to-methanol research.

Dow Chemical: Dow published their "Dow Methane Challenge" in March 2007. Dow has 43,000 employees and sales of $49 billion in 2008.

Velocys, Inc.: The company was created in 2001 to develop chemicals and biofuels using a microchannel technology. They are a subsidiary of Battelle Memorial Institute, have 78 patents and have received more than $100 million in investments from Dow Chemical, Toyo Engineering, MODEC and Total Petrochemical for research into methane conversion.

CompactGTL: In October, 2009 the company CompactGTL announced it is on track to supply Petrobras with a $45m, 20 barrels a day (b/d) pilot unit for processing associated gas into synthetic crude (syncrude) by the start of 2010 and that the Brazilian national oil company is likely to adopt the Fischer-Tropsch (FT) technology permanently. It is estimated they have invested more than $100 million in the development of the technology using microscale reactors to convert methane-to-syncrude.

There are other global companies researching "direct methane" conversion technologies, however, we believe we have an advantage due to our patent portfolio.

Our breakthrough is a chemical kinetic reactor system and process plant that is third-party validated to be 50% cheaper in CAPEX and up to 20% cheaper in OPEX over the competitors. This is disruptive in chemical engineering.

Given 20-20 hindsight, what would you do differently?
Start my own technology fund and fund the R&D development. The risk tolerance of investors for technology funds or VC funds is more palatable than seeking their investment into an R&D technology company. For young entrepreneurs, I would recommend the following steps to build value before you seek investors outside of friends and family:

1) Fund $200,000 from day one of your start-up with founders. You don't need more if you are an entrepreneur working from a college dorm room or a home with a family.
2) Hire a good patent lawyer and engineer to file two or three patents on your technology...whatever it is that you are doing. File as PCT and not domestic cases. This will give you 18 months to file globally, including the USA, when you have more money before 18 months expires. Finally domestically and international PCT is a waste of money in your early days. The filing date is your key after you do your research on your competitors.
3) Build a database of the competitive IP and spend time with your lawyers to really understand and document your competitive advantages over patents.
4) Hire an engineer who is strong in excel and build your financials from the bottom-up. Focus all your attention to detailed CAPEX and OPEX of your invention/innovation with the most accurate numbers. Spend $20K of the $200K to hire a third-party well known firm to independently audit your CAPEX and OPEX.
5) Avoid paying yourself a salary if you can...or at least the bare minimum. Bill yourself a salary on the books...but realize VC's and other investors will give you no value for your salary and will fight up and down to pay it with their money. If you took away their salary for a week or two they would threaten to walk from their company, but when it comes to your salary it will be worthless to them and will only be used against you in any discussions. Work as cheap as possible, and bill a reasonable salary. Don't spend $200K on you and your other teams salaries and then go look for more investors. Live and more modestly and be fair.
6) Package everything into a professional business plan built on the IP, the third-party studies and the financials from the bottom-up.
7) Go for $1-2 million to build your prototypes, pilot or even commercial scale innovation. Don't give up control. You can avoid giving up control by doing a completed PPM and avoid the VC investors at this stage.
8) Don't worry about revenues yet...one of the smartest things I saw was the co-founder of Twitter respond to someone who asked him about how much revenues they made last year. He said something to the effect, "We have not made any revenues, and are evaluating several models to generate revenues for the future. Currently, our entire focus is to build shareholder value." Don't loose focus that as an entrepreneur you need to build value, not revenues in the early days. If you are disruptive...revenues will follow this value. Don't let the VC's and others beat you up about pre-revenue...just focus on value.
9) Keep your exit strategy simple. IPO, M&A or licensing royalties.

I know my list is not going to be overly kind to some investors, but it was asking advice for entrepreneurs.

What is your most memorable fund-raising experience?
It is a compilation of experiences. In traveling and working in almost 40 countries, I have learned many different cultures and business ethics. Some entrepreneurs have very different funding expectations in different countries than we do here in America. If I were to choose two examples, I will show a contradiction in experiences.

In 1994 I was working in Russia on an oil & gas project, and was invited by a large production company for all expenses paid 2 weeks. Once arrived, I was taken from the airport to the hotel where I was informed my hotel was covered for 2 days, not 2 weeks. After I gave the hotel my credit card to resolve the controversy, I was taken to a large building for negotiations. This group had acquired a license from this regional government to raise funding, and within 60 minutes of the meeting it was disclosed that I was required to provide more than $5 million dollars of funding for this project and they would pay my 2 weeks expenses in Moscow. The key was I had to give them the money first, have it approved by their oil company director, and it would a partnership. At the time, it seemed just crazy...but in hindsight has I made that deal it would have been worth hundreds of millions today as I know the merger of that company and its acquisition value. What seemed crazy then makes sense in that environment at that time...but there was huge risks.

The second example is Silicon Valley. I spent a couple days there in 1999 with my lawyer from one of the largest firms in the USA. We met multiple VC's on a B&B marketplace deal we had put packaged. I walked out of two days of meetings and said...they guys are worse than the Russians! This whole thing is going to collapse as all these financial models are just baseless and unrealistic. The only revenues these tech companies show come from other VC backed deals so everyone is just swapping equity in one company for revenues into another partner company. These IPOs are really sexy, but the only winners will be the VCs who exit. It was not long that I started seeing the collapse and how the new models changed from 18 month exit strategy to 3-5 year exit strategy. Needless to say we never received any money, but in hindsight I'm glad we did not.

To my fellow entrepreneurs...hand in there and build value...the revenues will follow if you have a disruptive innovation. Don't give up, and don't think that every start-up has be funded by angels or seed fund VC companies. As we know, a couple years ago VCs would not touch pre-revenue companies unless you were in a sector of software or clean tech. No they are opening back up to fund pre-revenue deals, but there are other options...like what I outlined above. I hope it is helpful.

This has been written quickly and not edited...please forgive spelling mistakes or confusing sentence structure.

--
- Best, Tan Yinglan

--
- Best, Tan Yinglan

Way Of The VC Contest - Aplpco.com

2009-12-04T21:00:00.001-08:00

Rudy Preciado, Aplpco.com

Brief Profile of Entrepreneur / Venture.
Scenario: You are looking to purchase a red scooter, your in a car, out an about, or some location you are normally not accustomed to, you pull out your mobile phone, you click this downloaded application an type in your search criteria. The top 5 locations pop up with best price nearest to you. You can interact with them directly or indirectly, depending on your preference. You can either purchase those items & pick it up directly, or allow sellers to bid on your business. You accept the last price and pick up your item. You found your red scooter at the best valued price.

How is your product a breakthrough or disruptively innovative?
Real time, placing buyers & sellers near to each other. Exclusive marketing opportunities.

Given 20-20 hindsight, what would you do differently?
Surround yourself with people smarter than yourself.

What is your most memorable fund-raising experience?
One to one pitch with two people who were early stage VC's, and they drilled me on something I was barely putting together while looking for seed funds. They drilled me, drilled me, ask what I wanted, drilled me, and then said you are on to something ! Talk to us again later.
--
- Best, Tan Yinglan

Way Of The VC - Gas Technologies

2009-12-04T20:58:00.001-08:00

Walter Breidenstein， CEO of Gas Technologies:

Brief Profile of Entrepreneur / Venture.
In my experience, the entrepreneur and innovator needs to have broad vision, courage, high tolerance for risk and managing risk, the ability to cover the downside so that when they reach the middle of the valley of death in their venture they don't break down and walk away, and the patience to deal with money sources who don't care about your sleepless labors without Wall Street bailout returns. The entrepreneur and innovator must always be at the top of his game when abounding in the hills or when abased in the valley. There is no excuse for not delivering constant excellence, passion and true grit for the entrepreneur. He must learn to travel the world on a shoe string budget just as easy as he can with a bulging bank account. He must feel comfortable in 5 star resorts, and learn to sacrifice what is like to barter a couple nights hotel lodging to meet a budget if needed.

Is this type of entrepreneur and innovator still existing in our society? Read the books of the great industrialists and business leaders over the past 300 years and you will find this 1% out there in the historical record. However, I see these 1% true entrepreneurs and innovators being replaced by the modern entrepreneur who is funded with millions of VC dollars out of University, and how things have indeed changed. The real scrapper and street fighter entrepreneur has been replaced by the VC backed manager/employee and yet they have redefined the definition of entrepreneur and innovator.

How difficult is it to manage $2-5 million cash to build a company? Well, in 1999 during my first trip to Silicon Valley I saw what "entrepreneurs" called their burn rate of $2-5 million per month, and if you did not have that sort of burn rate you were not a true entrepreneur or innovator. Some spent more of other people's money, some spent less...but that was the litmus test and if you did not have a solid burn rate you were not "VC material".

Well, the times have changed again. Now, the litmus test is total money invested. How much money have you spent to-date as an entrepreneur to innovate and build value? If you want to be a truly disruptive (old term) technology you should have spent at least $10 million, and if you can pick up a licensed technology from a global giant to continue innovation, it would be great if they spent $100+ million. I recently saw a total $165 million total raise go into a technology which really has no chance to ever make money as an innovation, but the money follows the money to keep everyone "floating" before another crash.

Why would you recommend me or my service? Value and old fashion entrepreneurial work ethic comes to mind. Straightforwardness which can be hard for an entrepreneur as there is a very fine balance between appeasing those who manage other people's money and oneself who manages their own at constant risk. I would seek out the entrepreneur who is not necessarily handed several million out of college or leaves a fortune 500, but the 1% who have had to examine thousands of technologies and selected the 2-3 that will change the world in a specific sector.

How is your product a breakthrough or disruptively innovative?
With a total investment of ~$1.5 million dollars, I have managed to move the technology into competition (or collaboration) with multiple global energy companies.

There is sufficient evidence to demonstrate that our technology is worth tens of millions, if not hundreds of millions, due to our global patent coverage over our competitors. Who are the competitors? Which companies below would be potential buyers or licensors of our truly disruptive innovation?

Below is a list of companies where we have, or had, discussions on our technology and that are either competitors or potential collaborators.

Total Petrochemical: Total has nearly 97,000 employees' worldwide and posted sales of €179.9 billion in 2008.

Shell GameChanger: In September and October of 2009, Shell Energy Company posted on the front page of their website a challenge, "The world's rising global energy demand means we're going to need every type of energy… and can't afford to leave this valuable resource behind. At Shell, we're looking for new ideas on ways to access and transport stranded gas and get it from where it is to where it's needed. If you have the bright idea we're looking for, Shell GameChanger could help turn it into reality with financial investment and the technical support you need to take your proposal to proof-of-concept stage. After that, Shell could continue to work with you to take your idea further, or help you find partners for the next stage of development." Shell has 102,000 employees in more than 100 countries and territories, has revenues of $458.4 billion in 2008, and investment in research and development: over $1.2 billion (more than any other oil major).

BP International: BP has been one of the most active investors into R&D on methane conversion worldwide, and recently announced their new GTL process technology commercialization in Alaska. BP is one of the world's largest oil and gas companies with 92,000 employees, $361 billion in sales ending 2008, and is a leading player in the global biofuels market. Since 2006, BP has announced investments of more than $1.5 billion in biofuels research, development and operations.

ExxonMobil Chemical: Exxon is world's largest traded international oil and gas company with $477.4 billion in sales and 79,900 employees.

DOE/University of Virginia: On May 5, 2009 the University of Virginia, California Institute of Technology, Princeton University, the University of California-Berkeley, the University of Maryland, Iowa State University, the University of North Carolina, North Texas University, Yale University and Scripps Research Institute-Florida received an $11 million grant for methane-to-methanol research.

Dow Chemical: Dow published their "Dow Methane Challenge" in March 2007. Dow has 43,000 employees and sales of $49 billion in 2008.

Velocys, Inc.: The company was created in 2001 to develop chemicals and biofuels using a microchannel technology. They are a subsidiary of Battelle Memorial Institute, have 78 patents and have received more than $100 million in investments from Dow Chemical, Toyo Engineering, MODEC and Total Petrochemical for research into methane conversion.

CompactGTL: In October, 2009 the company CompactGTL announced it is on track to supply Petrobras with a $45m, 20 barrels a day (b/d) pilot unit for processing associated gas into synthetic crude (syncrude) by the start of 2010 and that the Brazilian national oil company is likely to adopt the Fischer-Tropsch (FT) technology permanently. It is estimated they have invested more than $100 million in the development of the technology using microscale reactors to convert methane-to-syncrude.

There are other global companies researching "direct methane" conversion technologies, however, we believe we have an advantage due to our patent portfolio.

Our breakthrough is a chemical kinetic reactor system and process plant that is third-party validated to be 50% cheaper in CAPEX and up to 20% cheaper in OPEX over the competitors. This is disruptive in chemical engineering.

Given 20-20 hindsight, what would you do differently?
Start my own technology fund and fund the R&D development. The risk tolerance of investors for technology funds or VC funds is more palatable than seeking their investment into an R&D technology company. For young entrepreneurs, I would recommend the following steps to build value before you seek investors outside of friends and family:

1) Fund $200,000 from day one of your start-up with founders. You don't need more if you are an entrepreneur working from a college dorm room or a home with a family.
2) Hire a good patent lawyer and engineer to file two or three patents on your technology...whatever it is that you are doing. File as PCT and not domestic cases. This will give you 18 months to file globally, including the USA, when you have more money before 18 months expires. Finally domestically and international PCT is a waste of money in your early days. The filing date is your key after you do your research on your competitors.
3) Build a database of the competitive IP and spend time with your lawyers to really understand and document your competitive advantages over patents.
4) Hire an engineer who is strong in excel and build your financials from the bottom-up. Focus all your attention to detailed CAPEX and OPEX of your invention/innovation with the most accurate numbers. Spend $20K of the $200K to hire a third-party well known firm to independently audit your CAPEX and OPEX.
5) Avoid paying yourself a salary if you can...or at least the bare minimum. Bill yourself a salary on the books...but realize VC's and other investors will give you no value for your salary and will fight up and down to pay it with their money. If you took away their salary for a week or two they would threaten to walk from their company, but when it comes to your salary it will be worthless to them and will only be used against you in any discussions. Work as cheap as possible, and bill a reasonable salary. Don't spend $200K on you and your other teams salaries and then go look for more investors. Live and more modestly and be fair.
6) Package everything into a professional business plan built on the IP, the third-party studies and the financials from the bottom-up.
7) Go for $1-2 million to build your prototypes, pilot or even commercial scale innovation. Don't give up control. You can avoid giving up control by doing a completed PPM and avoid the VC investors at this stage.
8) Don't worry about revenues yet...one of the smartest things I saw was the co-founder of Twitter respond to someone who asked him about how much revenues they made last year. He said something to the effect, "We have not made any revenues, and are evaluating several models to generate revenues for the future. Currently, our entire focus is to build shareholder value." Don't loose focus that as an entrepreneur you need to build value, not revenues in the early days. If you are disruptive...revenues will follow this value. Don't let the VC's and others beat you up about pre-revenue...just focus on value.
9) Keep your exit strategy simple. IPO, M&A or licensing royalties.

I know my list is not going to be overly kind to some investors, but it was asking advice for entrepreneurs.

What is your most memorable fund-raising experience?
It is a compilation of experiences. In traveling and working in almost 40 countries, I have learned many different cultures and business ethics. Some entrepreneurs have very different funding expectations in different countries than we do here in America. If I were to choose two examples, I will show a contradiction in experiences.

In 1994 I was working in Russia on an oil & gas project, and was invited by a large production company for all expenses paid 2 weeks. Once arrived, I was taken from the airport to the hotel where I was informed my hotel was covered for 2 days, not 2 weeks. After I gave the hotel my credit card to resolve the controversy, I was taken to a large building for negotiations. This group had acquired a license from this regional government to raise funding, and within 60 minutes of the meeting it was disclosed that I was required to provide more than $5 million dollars of funding for this project and they would pay my 2 weeks expenses in Moscow. The key was I had to give them the money first, have it approved by their oil company director, and it would a partnership. At the time, it seemed just crazy...but in hindsight has I made that deal it would have been worth hundreds of millions today as I know the merger of that company and its acquisition value. What seemed crazy then makes sense in that environment at that time...but there was huge risks.

The second example is Silicon Valley. I spent a couple days there in 1999 with my lawyer from one of the largest firms in the USA. We met multiple VC's on a B&B marketplace deal we had put packaged. I walked out of two days of meetings and said...they guys are worse than the Russians! This whole thing is going to collapse as all these financial models are just baseless and unrealistic. The only revenues these tech companies show come from other VC backed deals so everyone is just swapping equity in one company for revenues into another partner company. These IPOs are really sexy, but the only winners will be the VCs who exit. It was not long that I started seeing the collapse and how the new models changed from 18 month exit strategy to 3-5 year exit strategy. Needless to say we never received any money, but in hindsight I'm glad we did not.

To my fellow entrepreneurs...hand in there and build value...the revenues will follow if you have a disruptive innovation. Don't give up, and don't think that every start-up has be funded by angels or seed fund VC companies. As we know, a couple years ago VCs would not touch pre-revenue companies unless you were in a sector of software or clean tech. No they are opening back up to fund pre-revenue deals, but there are other options...like what I outlined above. I hope it is helpful.

This has been written quickly and not edited...please forgive spelling mistakes or confusing sentence structure.

--
- Best, Tan Yinglan

Venture-Backed Business Plans

The Way Of The VC at Borders, University Ave, Palo Alto

Angels vs. Venture Capitalists

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Angels vs. Venture Capitalists

Things you can do from here:

Thanks for your support - Book has reached #69,461 (even before formal release)

The Way of the VC: Having Top Venture Capitalists on Your Board (Hardcover)

Product Details

Ubisoft Acquires Singapore-Based Social Game: Pokerama http://bit.ly/7XSKUm

Cisco Acquired Most Start-Ups In Decade, But Oracle King In ‘09

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Cisco Acquired Most Start-Ups In Decade, But Oracle King In ‘09

Things you can do from here:

'Start-up' visas to boost US tech

Old VC firms with strong track records – e.g. Greylock Partners and Norwest Venture Partners - and new firms with strong pedigrees - Andreessen-Horowitz - continue to have no trouble collecting capital.

Thefunded.com: Empty vessels make the most noise

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Thefunded.com: Empty vessels make the most noise

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