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UC Davis — Workshop: Gates Foundation Grand Challenges, April 23, 2010

VStart — Thu, 15 Apr 2010 15:40:34 +0000

Bill and Melinda Gates Foundation
Grand Challenges Explorations Workshop
Friday, April 23, 2010 at 3:00 p.m.
UC Davis Conference Center
2nd Floor Conference Room

The Office of Research, Office of University Development, and the Foods for Health Institute are hosting a workshop on the Bill and Melinda Gates Foundation, Grand Challenges Explorations Round 5.

Grand Challenges Explorations awards of $100,000 support early-stage research projects designed to overcome persistent bottlenecks in creating new tools that can radically improve health in the developing world. Successful projects have the opportunity to receive a Phase II grant of $1 million.
Topics for Round 5 of the Grand Challenges Explorations include:

Create Low-Cost Cell Phone-Based Applications for Priority Global Health Conditions
Create New Technologies to Improve the Health of Mothers and Newborns
Create New Ways to Protect Against Infectious Disease
Create New Technologies for Contraception

Two-page applications for the awards are due online to the Bill and Melinda Gates Foundation by noon on May 19th.
The workshop will be held on Friday, April 23rd at 3:00 p.m. in University Development’s large conference room on the second floor of the UC Davis Conference Center (across from the Mondavi Center for the Performing Arts).

For more information, please contact Vivian Carmichael, Director of Foundation Relations, (530) 754-4138, vlcarmichael@ucdavis.edu.

Sacramento Startup Micromidas Raises Series A Round

VStart — Tue, 06 Apr 2010 18:16:40 +0000

Micromidas has just completed its first major round of funding, having raised $3.6 million. The funds will be used to deploy their technology at the pilot scale.

Micromidas, based in West Sacramento, develops and scales environmentally benign biological and chemical processes that produce valuable chemical and material commodities from waste biomass. The first Micromidas application for their technology is scaling a process that converts the carbon in organic wastewater into PHA (polyhydroxyalkanoate), a family of bio-degradable plastics that can be used in lieu of conventional petroleum plastics. Their process generates highly functional bio-plastic while simultaneously reducing the quantity of bio-solids that municipal utilities must pay to treat. Micromidas is led by CEO and founder, John Bissell, who received his degree in chemical engineering from UC Davis; his entire team are also UC Davis graduates.

If you’ve ever met John you will understand that his passion, focus, determination, and hard work, as well as Micromidas’ huge business potential, were the key factors in launching the company, and raising the money, initially from family, friends and angels, and then from a group of sophisticated investors.

There are some lessons here for aspiring entrepreneurs. John used every resource available to learn about the process of financing a high growth company, including many regional ones. He was inspired by the UC Davis Green TEA Academy which he attended in 2008 at Incline Village (UCD offers multiple versions of its Entrepreneurship Academy). Following the Academy, he found mentors among the Sierra Angels and others and then entered the 2009 California Cleantech Open, where Micromidas won in the Air, Water and Waste group. This created substantial publicity for the company and provided more mentors, and a network of interested supporters, something many entrepreneurs neglect and fail to build.

Along the way, he sought and received advice from VentureStart and local startup CEO’s, and was invited to and attended angel group dinners to get further insight into the ins and outs of raising money. In the entire process, we are sure that, while much of the advice was valid, it varied considerably from mentor to mentor and source to source. That’s the nature of getting a startup going; there is no absolutely right or wrong process; the entrepreneur listens, distills and then decides the best path for his or her company. And in the process they build and communicate with their network, never really knowing the path any lead will take. For Micromidas, that network worked out very well.

Congratulations to Micromidas and John!

Hurting Angel Investing — Unintended Consequences …. or Not!

VStart — Mon, 29 Mar 2010 17:55:46 +0000

Senator Dodd’s current financial reform bill is designed to address financial reform and regulation of the big banks, including the “too big to fail” issue. But it may have unintended consequences by reducing the number of angel investors while at the same time putting regulatory hurdles in place. These hurdles will increase the time it takes (yes, even more!) for entrepreneurs to raise money, and put more bureaucracy in the way further discouraging angel investors.

There is a post on VentureBeat today that has more details and discussion. That post also has some good summary information on the SEC rules that relate to all entrepreneurs Read More »»

Startup Valuation — How It Really Works!

VStart — Tue, 09 Mar 2010 02:37:01 +0000

Want to know how Venture Capitalists think about valuing your startup company? Here is an article by Scott Lenet of DFJ Frontier, who have a Sacramento office. Looks like formulas aren’t used; rather valuation is based on three things:

Valuation of deals done on comparable companies
Investors’ experience, and having the opportunity to see many deals, done or not
Whether the investment return at the time the company exits (e.g., sells to another company, or does an IPO), under the best circumstances, meets the VC firm’s criteria

The article could lead one to think that a 10 times (10x) return is great for the investor. Well, we are not sure that is universally accepted. Consider the early stage investor (angel or seed stage VC) where maybe only one in ten of their investments really make it; 10x will just get you your money back on your entire portfolio (the great one just makes up for the nine that fail or just muddle along)! We would think experienced investors will have higher expectations!

Web Startups — Do You Have a Technical Co-Founder Who Can Code?

VStart — Sat, 30 Jan 2010 21:34:54 +0000

VentureStart gets many Sacramento region web startups applying for our mentoring. Very often we see great ideas and the need to raise money to hire people to code the idea/application. We normally encourage these startups to get a co-founder, or someone who will work for stock, on the team, and then get some traction before even considering raising money from Angel groups or VCs.

Adam Kalsey, the founder of SacStarts and a VentureStart mentor, recently gave advice on this to one VentureStart entrepreneur and then published it on his blog. We quote it here since it is so relevant to web startups.

“Got an idea for a technology product but don’t have the technical chops to build it yourself? You’ll need to find yourself a cofounder.

You’re building a technology company, but have no technology people on the founding team. This leaves you with three options. Hire, outsource, or find a technical co-founder.

It’s nearly impossible for a technology company to succeed by outsourcing their early product. Don’t even think of going that route. Freelancers or outside firms can’t possibly deliver what you want because they don’t actually care about the product or the outcome.

To hire someone full time, you’ll need to pay them a reasonable wage. For someone that’s capable of taking the business ideas you have and translating them to a real working product that won’t fall over as soon as people start using it, you’re looking at at least $80k/year in Sacramento. Don’t think you’ll go get funding and then hire someone. You’re going to need a product before you can get any funding. Gather together whatever funding you have now and hire a developer. It’s going to be important to hire the right person the first time, so if you don’t have anyone who has hired technical people for small teams before, I’d be happy to help you screen candidates.

Your third option is to gain a technical co-founder who’s willing to build this for a cut of the company. Expect to give them 25-30% of the company, but make sure you have a vesting arrangement so some crook doesn’t sign on, take 30% and quit the next day. I can help you screen these people and advise you on how you can structure things with them.

Here’s the thing… You can’t just go out and “find a co-founder” any more than you can go out and “find a wife.” Your co-founder relationship is just that, a relationship. You’ll have a significant relationship with this person, and they with you. Likewise, they’ll have a serious relationship with the business. You need someone to fall in love with you and your idea and to love it enough they’re willing to take tremendous risks in order to be involved. People grow into relationships, they aren’t recruited into them.

So how do you find your co-founder? Same way you found your wife. You meet lots of people. Put yourself out there. Make sure people know you’re available. Date.

Talk about your ideas with everyone you meet. Most people won’t want to hear about it. But some will have feedback. This feedback will shape your ideas and change your business. Along the way, you’ll meet someone with a technical mind that gets just as excited about your idea as you do. You’ll find that the two of you can’t seem to spend enough time talking about the idea and the business. You’ll know that this person is the one.”

Video For All Startup Entrepreneurs

VStart — Wed, 20 Jan 2010 01:24:33 +0000

We saw a great video today that every startup entrepreneur should take a look at. It is an online interview by Jason Calacanis of Brad Feld. Jason is an outspoken entrepreneur who recently created a huge online discussion about entrepreneurs having to pay substantial dollars to present to Angel investors. Brad Feld is an entrepreneur, turned Angel and VC, who is very entrepreneur centric and has a widely read blog (that’s where we found this).

This video is 2 hours long but the first 90 minutes are really worth listening to. It covers these topics:

Types of Angel investors and cautions about the make up of Angel groups
Paying Angel groups to present
Building an entrepreneurial culture in Boulder (population 150,000) by importing entrepreneurs — thoughts for Sacramento?
How, in web-based startups, having geeks on the startup team is more important than domain expertise
Good tips on pitching with an entrepreneur pitching live over the phone
How investors in multiple rounds of financing can destroy a company with in-fighting to the detriment of the entrepreneurs
Passion and perseverance — with an example of one of Brad’s investments that took off after ten years!

Yes, it’s long but …….

Sacramento Angels Lead $2.3 Million Round For Reframe It

VStart — Thu, 14 Jan 2010 21:53:54 +0000

The Sacramento Angels, together with the Sierra Angels, led a multi-million dollar financing for San Francisco web annotation startup company, Reframe It. They were joined by other regional angel groups and individual angels. You can read the web press release here, and see another report of the financing gathered, in part, from the filing with the SEC of Form D here.

There are a couple of interesting points for entrepreneurs about this financing. First, you can see that to raise this kind of money from Angels, it takes a lead (the lead negotiates the deal terms, does the due diligence, and then actively seeks additional investors to fill the round; it takes time!). Second, Form D is a way for entrepreneurs to get some idea of the financing that, say, a competitor has previously obtained. It does not reveal much detail but it certainly gives some idea of how much has been raised.

You can search companies on the SEC web site here. Just enter the company name and look for Form D(s). You can see the Reframe It Form D here. To learn more about Form D go here.

10 lessons in bootstrapping a business

VStart — Mon, 02 Nov 2009 17:10:26 +0000

Many startups with high growth ambitions immediately think of raising money from angels or VCs. This can be challenging for first time entrepreneurs, and if family and friends money is not an alternative, then the choices left are often credit cards or bootstrapping. Here is a post on the top 10 lessons in bootstrapping from VentureBeat.

There are two ways to build a business: Raise a bunch of money or bootstrap. When I was in business school, there wasn’t much attention given to the bootstrapping notion. The “MBA way” of growing a business is to write a business plan, raise money and then execute the business plan. But I think that’s almost always the wrong approach.

We bootstrapped Infusionsoft for several years before ever raising capital. The lessons we learned were, and continue to be, invaluable. Here are the top ten lessons we learned from this method – and why I continue to evangelize bootstrapping to entrepreneurs:

10. You’ll learn you can keep expenses low. In the early days, we learned that many “necessities” are really luxuries. For a long time, we didn’t have a copy machine. We used our fax machine, went paperless and occasionally borrowed our next-door neighbor’s copier. After a couple years, we bought one of those multi-function machines from Costco for a few hundred bucks. Not until we were doing a couple million bucks in annual revenue did we get a “real” copy machine. You can argue whether the copier is a necessity or a luxury, but you can’t argue that we learned to keep expenses low and still effectively do our work.

9. You’ll manage cash better once you have it. The discipline you develop when bootstrapping will stay with you so that you don’t blow your cash once you’ve got it.

8. You’ll develop your Minimum Viable Product. When you don’t have a treasure trove of cash, you get the product to market as fast as you can. Good is good enough. You don’t fret perfection. And you don’t waste resources “guessing” what your customer wants. You get it in the customer’s hands as quickly as possible. Infusionsoft began as a custom software company so we developed our sales and marketing automation software with feedback from our customers. Our R&D came directly from their input and as a result our product, with every release met the customers’ needs more and more.

7. You’ll know you’ve got a real business… before wasting OPM (Other People’s Money). I’ve just never felt comfortable taking an investor’s money if I don’t know I can multiply it. If you don’t bootstrap, you’re taking a serious risk with someone else’s money.

6. You’ll employ missionaries instead of mercenaries. You don’t have the big bucks to pay the hired gun. You can only afford to hire passionate people who really believe in the cause – and that’s a great thing. In a startup, passionate employees almost always outperform experienced corporate types who command big bucks.

5. You’ll stay focused on your core business. Raising capital can take more time than selling and servicing your customers. If you try to raise money too soon, you’re probably going to take your eye off the ball and leave your customers hanging. You might actually bring in more cash by spending your time with prospects and customers. Plus, you’ll raise money faster and easier after bootstrapping. Investors get excited about investing in a business that’s generating a lot of revenue and hasn’t raised any money from investors.

4. You’ll retain the equity in your business. Once you raise capital, you’re giving up some ownership in your company. The longer you can avoid raising the capital, the bigger the piece of the pie you’ll own down the road. For this reason, if no other, you’ll want to hold off raising capital for as long as you can.

3. You’ll retain control of your business. Investors have wants, needs and demands. Once you take their money, you need to answer to them. In the best case, they take up some of your time. In the worst case, they force your hand or move you out. Don’t bring on investors until you can multiply their money and thereby keep them happy.

2. You’ll learn to sell. When you don’t have cash in the bank, you’d better know how to sell. It’s amazing how many entrepreneurs who raise capital are great in academic discussions but terrible on a sales call. The art of persuasion is not what business school is teaching, but it’s what drives the success of the business.

Often when you have raised VC, it’s easy to fall into the “strategy” trap. That’s where the team spends most of its time engaging in relentless discussions on strategy and big ‘game-changing’ things, which is fine, but who’s selling? When you haven’t raised venture capital, you get your butt on the phone and you persuade people to buy your stuff. When you bootstrap, you learn that selling—while it may not be glamorous—is what drives the business.

1. You’ll listen to your customers. Bootstrapped companies learn from the very beginning that their customers—not their investors—sign the paychecks. They listen, they adjust and they care – because they have to. There is no other way if the bootstrapped company wants to survive. This fundamental concept is at the heart of why bootstrapped companies are stronger companies in the long run. They cultivate from the very beginning, and they ingrain in their DNA, a strong desire to serve the customer.

So, what did I leave out? What have you learned from bootstrapping? And when do you think it’s time to move from the bootstrapping game to the OPM game?