My Weblog

We thought the DFJ Gotham $250k competition was huge, squashing the Forbes $100k and MIT $100k. Although a very niche competition, the Global Security Challenge offers $500,000 cash as a prize as well as mentorship from leading venture capitalist firms such as Siemens Venture Capital. Students are welcomed to enter since they are looking for innovators and new technologies from university labs (71% of security startups actually originate from universities). In general, they are looking for technologies that have potential to aid and increase the United State’s security. The “Crowded Places” category offers a $10,000 prize to protect citizens from terrorist threats and doesn’t require a product or prototype.

The competition is open for submissions. Check out the types of technologies they are looking for and visit their site for more information.

Target Technologies

We seek to uncover the creative capabilities of innovators in universities and infant companies that apply to public security needs. This includes software or hardware solutions that help (a) protect people, critical infrastructure, facilities and data/electronic systems against terrorist or other criminal attacks and natural disasters or (b) help governments, businesses and communities defend against, cope with or recover from such incidents.

Examples of our areas of interest are (but are not limited to) biometrics, detection sensors, network security, data storage, video surveillance, RFID, data-mining SW, biotechnologies, and search software.

The majority of startup incubators, such as Y Combinator, require entrepreneurs to give up small percentages of equity in exchange for small amounts of seed financing, usually in the range of $15,000. While they are usually tremendous opportunities to work alongside seasoned entrepreneurs and venture capitalists, it is still questionable whether or not they actually increase the entrepreneur’s chance of success and if it is worth giving up their equity. The connections that are made along the way are valuable, but as these firms take on more projects (Y Combinator has seeded over 80 companies) the returns for entrepreneurs diminish as those resources are spread thinner over time.

Obsidian Launch takes a different approach. Resources are focused for a longer period of time. The entrepreneur doesn’t have to give up any equity either! Well, they do have to give up “phantom equity,” but this it’s not the same. Instead of taking shares, Obsidian Launch takes a percentage of earnings for a specified amount of time. In exchange, Obsidian Launch provides a team of professionals such as accountants, lawyers, and entrepreneurs to accelerate the growth, revenue, and profits of the company that it has undertaken. The success of Obsidian Launch is more closely tied to the success of a young entrepreneur’s company, creating a much larger incentive for the company to make the startup successful. Fewer companies are taken on in a given time period, allowing the entrepreneur to work closer with the firm. (more…)

SCORE, which is a non-profit aiming to educate entrepreneurs and small business owners, recently launched a new section with resources for young entrepreneurs.

Visitors to the site will find the following resources:

• Insights for Young Entrepreneurs features key articles on: entrepreneurship as a career choice; Web site design; university assistance; and how to start smart.
• Resources for Young Entrepreneurs lists more than 35 organizations, groups and Web sites that offer news, strategies and assistance.
• Competitions for Young Entrepreneurs features eight awards that help encourage and recognize business success.
• Stats on Young Entrepreneurs provides the latest research and facts on Generation X and Generation Y entrepreneurship.
• How SCORE Can Help You highlights SCORE’s free online and face-to-face counseling, low-cost workshops and free eNewsletters.

SCORE is headquartered in Herndon, VA and Washington, DC and has 389 chapters throughout the United States and its territories, with 10,500 volunteers nationwide. Both working and retired executives and business owners donate time and expertise as business counselors. SCORE was founded in 1964.

I just recently attended Founders Day at Babson and Emerson’s Experience in Entrepreneurship. I didn’t know Emerson students were a strong entrepreneurial group and was rather impressed by the creativity and depth of 18 startups. Comparing the Babson program with the Emerson, I am going to have to say that Emerson takes the lead. This may come as a shock to some since Babson claims that it is the epicenter of entrepreneurship. I favor the Emerson startups because most students continue working on their startups after the program end, where as the Babson startups stop.

In just three years, Emerson has helped launch over 50 student businesses. E3’s director, Dr. Karl Baehr, has been recognized by Fortune Magazine a Top Professor of Entrepreneurship in 2007. The mayor of Boston even went on to declare E3 Day in the city last year. The course also gives students a minor in entrepreneurial studies. Here is a description of the course and a list of startups in the exposition: (more…)

Collegiate entrepreneurship is rapidly expanding with over 10,000 new startups founded each year by undergrads, graduate students and recent graduates from the top 50 entrepreneurial schools alone. In response to this trend, companies have formed to provide a centralized hub for all of this young entrepreneurial activity. StudentBusinesses.com, which is one of the best ones that we have come across, provides an interactive online directory, resource center, and platform for the best student entrepreneurs to collaborate, network, and connect with potential investors. StudentBusinesses is led by a committed team which has brought the company early successes and promising future growth. For these reasons, we are excited to announce a partnership with them.

As active members of the entrepreneurial organizations at Harvard, founders Travis and Vivek, realized that there was no “single, structured resource to serve the needs of young entrepreneurs and their startups.” They have already managed to attract over 800 students from top universities and nearly 300 student startups who have listed profiles on their site. They also have a number of professionals who have paid for access to the directory. Their ability to partner and sell their services to professionals is not only an impressive accomplishment, but an enormous value-add for entrepreneurs seeking funding and connections. I have found the site is easily navigable and therefore particularly useful for searching for entrepreneurs with specific skill sets such as engineering and web development as well as resources for early stage startups.

SB has also established partnerships with schools such as Columbia, Yale, Princeton, Dartmouth, Duke, and North Carolina State and has created their own $1,000 National Business Plan Competition, which they are aiming to launch on a much larger-scale this year. They are expanding fast and will are also look to start moving abroad. If you are a serious entrepreneur, we strongly recommend creating a profile on their site. They have been able to secure clients from the following different categories and have over 10 more in their sales pipeline.

• A law firm
  
• An IT consulting firm
  
• A financial advisory firm
  
• An accounting firm
  
• A startup consultancy
  
• A marketing firm
  
• A venture capital database
  

We are expecting SB to be one of the premium landing spots for college startups. We will be collaborating with them to provide the best resources, exchange of news from our portals, and voice for the most promising student startups. Their service will become increasingly important as their database of paying professionals grows with time. Although they are new, they have certainly been able to gain some headway and momentum.

“My business partner and I are both longtime members of StudentBusinesses.com. After posting on the site, we were contacted by a venture group in Philadelphia (DreamIt Ventures), informing us of a startup incubator they were launching that offered funding, office space, advice and large-scale business connections. The program sounded fantastic. We followed up, successfully joined the program, and gained access to seed financing and a host of other resources. My partner and I are both so grateful for StudentBusinesses.com: it enabled us to connect with this program and put our business on a much more successful path.” -David Kosslyn, Harvard College ‘11

Rate StudentBusinesses.com on the bottom of their Company Profile

Highland Capital Partners, a prestigious venture capital firm, is holding its second annual Summar@Highland incubator program that helps accelerate undergraduate and graduate student entrepreneurs and their startups. Selected teams will have access to seasoned Highland investment partners who will provide “resources for injecting real-world advice, insight and perspectives into the entrepreneurial and company-building process.” Entrepreneurs who are accepted for this extraordinary opportunity will receive a $7,500 stipend for the summer for 1 person teams and up to $15,000 for multi-person teams along with shared office space. Requirements include a dedicated 10 weeks and opportunity for Highland to invest in at least half of a round of venture funding for all startups who are able to gain funding within 180 days. Beyond that, there are no strings attached. Here is what they are looking for:

What we’re looking for

We are especially interested in having you spend the summer with us if:

• You’ve a leadership team with vision, passion, and drive

• Your business has the potential to be highly-disruptive in its area

• Your business initiative is showing momentum. While you may, or may not, have incorporated, you’ve more than a vague concept in mind

• You have real depth of expertise in your technology/market of interest

• You can direct us to some advisors who see your business’s potential as you do

They are accepting applications now, you can apply here on their website. Hurry, the deadline is April 22.

One of the best things you can do as an entrepreneur is to surround yourself with other already successful and seasoned entrepreneurs who know what it takes and know how to get to the holy grail–the IPO. It’s like with any other skill set; if you want to be a great basketball player, you must continue playing with people who are better than you to improve. The same is true with starting a business and developing as an entrepreneur.

Bob Davis is a General Managing Partner at Highland Capital Partners and founder of Lycos. He led the company from $2 million in funding to a multi-billion dollar profitable company with the fastest NASDAQ IPO in less than five years. Enough said. I just heard him speak at Babson. In a nutshell, here is the story of how he did it and some key points of advice for those entrepreneurs out there looking for funding.

In 1995, Lycos started as a technology developed by a researcher at Carnegie Mellon University. However, he had no desire to build a business and so Bob Davis was hired as the CEO by Highland Capital Partners to build the company. The technology was actually fairly late, and several players, such as Yahoo, already secured significant market share. But with $2 million in funding (pennies compared to some of the deals today) and a great go-to market model (they were actually criticized heavily at the time for it), Bob managed to position himself to become a dominant player. At the time, Lycos only had 13% market share, which he explained is barely enough to get noticed compared to Yahoo’s 50%. (More than one company can obtain 50% market share because users usually engage with several different services). His primary plan of attack worked in the same way that popular TV shows and advertising does today; a show will advertise on another popular show’s programming in order to drive traffic back to theirs. He accomplished this by rolling out an aggressive acquisition strategy to build his own network of strong individual brands that he kept separate rather than integrating into one umbrella company. Since many activities online (such as checking email, poking someone on Facebook, reading an article, checking a sports score) are relatively quiet actions, they are not considered “deep.” In other words, one advertisement will not be seen frequently or long enough to have a desired impact. So, he leveraged this expanding network to place ads and drive traffic from popular websites (those that he acquired) back to the search engine so that the advertising was seen more frequently in a higher number of users’ contact points. It resulted in people jumping around within the network, boosting traffic and exposure, and growing their market share to over 55%.

Now, here is some advice and insights from his speech:

• Public markets are extremely fickle, even IPOs that look like they will go through usually don’t.
• When investing in a company, a VC will ask himself: “Does this have potential to grow into its own stand alone public company?”
• How are early stage companies valued? – Comparables.
• If a team is incomplete, it’s not necessarily bad; the VC firm is always willing to help build the team and will never replace one.
• Not having IP is not a deal killer: it is sometimes enough being first to market; however, the entrepreneur must be able to support a plan on how he believes he can sustain the market share.
• A team that doesn’t know how to sustain differentiation is a frightening situation.
• Advertising is HUGE. It is a $280 billion market in the US. If you don’t think those ads matter, they do, and they definitely drive buyer decisions whether you realize it or not.
• A purely ad supported model is not bad. In his own words: “An ad supported model gets me very excited.”
• An advertising model combined with another model is bad because it confuses and is extremely difficult to execute well.
• Simplicity of a one revenue driver is key.
• It is better to build an audience and monetize later, rather than spending lots of time on insignificant levels of revenue in the beginning and causing distraction.
• PURITY OF FOCUS
• Advertisers look for: REACH + FREQUENCY + IMPACT
• Good board members will serve as a voice and not make business decisions.
• Recruiting is always difficult (even for Highland), and can always be done better.
• Hire someone who is able to make an energetic promise that they will be the best in their respective field.
• Heading into recession, it is time to conserve. There is already a lot of money in the marketplace and new money will likely be tougher to come by, especially as liquidity options are slowing down.

At the very least, go to these types of events (don’t be lazy!) and surround yourself with the folks who do it (or know it) best.

Sequoia Capital is one of the most prestigious venture capital firms in the world. They have been the first investor and business partner in companies that combined, make up 10% of the NASDAQ’s value. It must be a dream come true for any business that receives funding from Sequoia, as they have extremely specific investment requirements and are primarily searching for companies that according to them, “have the chance to become very significant.” Very significant? Sequoia has backed a few companies you may have heard of: Google, YouTube, Electronic Arts, Yahoo, and Oracle to name a few. Needless to say, Sequoia has an eye for the next big thing.

I recently found recommended elements for what they believe constitute a concrete business plan. Business plans are usually quite hard to write, so the following should help. They also advocate a brief 15 - 20 slides and should be able to portray a lot of information in as few words as possible. The following can be found on their website as well.

Writing a Business Plan

Company Purpose

• Define the company/business in a single declarative sentence.

Problem

• Describe the pain of the customer (or the customer’s customer).
• Outline how the customer addresses the issue today.

Solution

• Demonstrate your company’s value proposition to make the customer’s life better.
• Show where your product physically sits.
• Provide use cases.

Why Now

• Set-up the historical evolution of your category.
• Define recent trends that make your solution possible.

Market Size

• Identify/profile the customer you cater to.
• Calculate the TAM (top down), SAM (bottoms up) and SOM.

Competition

• List competitors
• List competitive advantages

Product

• Product line-up (form factor, functionality, features, architecture, intellectual property).
• Development roadmap.

Business Model

• Revenue model
• Pricing
• Average account size and/or lifetime value
• Sales & distribution model
• Customer/pipeline list

Team

• Founders & Management
• Board of Directors/Board of Advisors

Financials

• P&L
• Balance sheet
• Cash flow
• Cap table
• The deal

This can be found on their website as well. If you need help with your bplan, Miles and I have experience from pitching for several venture capital firms and placing in the Boston College Venture Competition for our other company Textworks.