Are You Ready to Deal with VCs?

If you are an entrepreneur and want to understand how smart VCs are in terms of financial wheeling and dealing, read this summary of the Intermix Media deal by VC Bill Birnhaum.

Like many entrepreneurs, you’re probably either great at technology or
marketing, but you leave the finance stuff to others. This can be a
costly mistake. Invest a lot of time talking to investors and
entrepreneurs to get an idea for what kind of deals and terms are out
there. If you don’t take the time to understand cap tables and term
sheets, trust me, you may be in for a wild ride, and you won’t be in
the driver’s seat. It can get painful.

Recently I loaned three books, including Term Sheets and Valuations (a
must read!), to a local entrepreneur who was raising a couple of
million dollars. He was very thankful. I told another entepreneur he
had to visit with Kent Thomas of CFO Solutions before accepting a term
sheet. He did, and they pushed back on a lot of terms and got a much
better deal.

Most of us make big mistakes the first time around, whether dealing
with angel investors or VCs. It’s complicated stuff and not as
interesting as creating products and markets. But it’s essential to get
good advice on these issues. Find some trusted advisors who have your
best interest at heart.

Design Your Own Personal Keyword Alert System

I have almost 250 Google Alerts now on topics, people, and companies,
so I receive emails on my blackberry every time news occurs about any
of these. This is like having a personalized, real-time Burrelle’s
clipping service that is delivered to my PDA. It is invaluable.

New terms I added today: fairtunes, giftwiki, bango, mobeon

Before I spend time personally one-on-one with entrepreneurs who want (free) advice, I ask them to do several things, including set up Google Alerts.

When I speak to students or educators I plead with them all to take
advantage of this amazing free service that will wire their brain to
breaking news around the globe about topics they are most interested in.

Imagine the increase in personal intellectual capital if every employee
in every company did this, and if every student and professor did this
as well.

Now fast forward a year or two when Google Alerts (or the equivalent)
will work with radio and TV broadcasts and conference transcripts and
university lectures and books as well.

Each of us will be able to design our own life-long learning
curriculum. We will be more intelligent, because we have designed our
knowledge alert systems, rather than reading a newspaper or watching a
TV news program with 22 minutes of airtime (with only a tiny fraction
of the information being relevant to us personally) and 8 minutes of
commercials, which are mind-numbing and inane.

One of the most useful skills in the future will be designing our own
personal keyword alert systems. I wonder if there is an opportunity to
consult with large corporations to help them implement personal keyword
alert systems for hundreds or thousands of employees, to help them stay
competitive, monitor their competition, be alerted to successes and
best practices that might affect them, and so forth.

I might be willing to design a consulting practice around this, in case someone is interested….

Things I Love

I love blogging.

Last month 23,000 unique visitors came to my web site, mostly to read
my blog. Two weeks ago I blogged about how only 4 students had signed
up
for the Internet Marketing course at BYU that I’m scheduled to teach
this fall. Now there are 32 enrolled.

I love Wikis.

Our FundingUniverse.com
team launched a Wiki last week for entrepreneurs. We have 8 volunteer
editors so far who are going to help us recruit contributors and build
a Wiki that contains thousands of quotes and "success tactics" from the
most successful entrepreneurs of all time. Our hope is that
entrepreneurs will use this Wiki to find new ideas by discovering what
worked for others. I have several hundred extracts from
autobiographies, biographies, articles, and business histories to add
myself.

This morning at 4 am I woke up with two new ideas–a Wiki to track all
the venture capital firms in the world, and a Wiki to track angel
investors. I emailed our developer and by 12:00 noon he had launched both new Wikis
and the DNS was already propagated, so I could actually start editing
them. I was amazed. (I love smart developers. I love going from idea to
implementation in a matter of hours. That’s what I try to optimize my
creative life around. That’s why I like to be involved in lots of
companies with free developer resources.)

I love my mp3 player.

Whenever I don’t have enough time for my morning "devotional" I listen
to scriptures, talks, and audio books on my Creative Zen 40 GB mp3
player. What I really want is an mp3 player that downloads content I want without having to connect to my computer; but that may
be a year or two away. In the meantime, I love content from Audible.com and LDSAudio.com. I’m looking forward to mp3books.com
(which my Infobase Media company launched a couple of weeks ago)
acquiring hundreds of new audio titles. I’ve been pointing them to some
wonderful sources.

I love my Blackberry.

I could accomplish only a fraction of what I do each day without my
Blackberry 7230 combo cell phone, email, address book and calendar. I
can type 55+ wpm using my thumbs. I have decided that this is my core
competency. :)

I love Yahoo’s Mailing Lists feature.

I finally dumped Outlook (after my .pst files kept getting full) and
went to Yahoo Mail (I use Gmail as well to manage all my alerts). It
syncs with my Blackberry. I’m now taking my 2,600 contacts which were
extremely difficult to manage in Outlook and I’m building email groups
and lists very quickly.

VC Firms Increase Funding for Early Stage Startups

A report shows that early stage funding is increasing.
$1.3 billion in venture capital flowed into early stage companies in
the second quarter up from $830 million in the first quarter. I keep
hearing that VCs are doing more early stage deals, but this is the
first report I have seen that bears this out.

Still, the 750 companies funded by VCs are a tiny number compared to
probably 10-15,000 that are funded each quarter by angel investors
(including friends and family, doctors and dentists and first-time and
serial angels). That is why there is such a need for FundingUniverse.com to match local entrepreneurs with local angels.

According to Angel Investing (p. 146), a book published in 2000 by two Harvard
Business School professors, "In the United States, angels invest in
around 22 percent of the deals they seriously consider" while "venture
capitalists invest in only about 1-3 percent of proposals received."

Serious entrepreneurs should consider both avenues when trying to get a
company off the ground. But the odds are far greater than angels will
fund your company than that you will be one of the few who attract
professional venture capital — especially if you are a first-time
entrepreneur.

Strategy Tree

I need help from some entrepreneurs and business school professors or students.

I am looking for ten people who will volunteer to be an editor on a new
Wiki for entrepreneurs, one that will identify the best entrepreneurs
of all time and the decisions that they made that led to their success.

We’ll organize quotes from the entrepreneurs and extracts from
biographies and business histories into a taxonomy or decision tree. So
any entrepreneur who wants to know how to bootstrap, how to recruit
advisory board members, how to get their first sale, how to find a
strategic partner, or how to find an angel investor, will be able to
visit the Wiki, click on one or two links, and then read hopefully
dozens of actual quotes from actual entrepreneurs telling their story
— how they did it.

Our goal is to spark the imagination of entrepreneurs by making it easy
for them to read how others succeeded each step of the way.

The wiki is live, but it’s not ready for public consumption until we
have our volunteer editors in place. It is being sponsored by FundingUniverse.com.

The requirement for an editor is to spend about an hour each day adding
content to the Wiki (in keeping with our guidelines) and then, when we
launch publicly, to spend an hour each day making sure that the Wiki
content from outside contributors stays true to our mission.

We hope this turns into the Wikipedia for entrepreneurs worldwide.

If you have an interest, please email me at paulballen "at" yahoo.com.

Thanks

An Experiment in Open Source Business Ownership

I don’t have time to blog today…I’m preparing to fly out for the AlwaysOn Network event at Stanford…but I got this email about a very cool “wisdom of the crowds” concept where a group of 2,500 or so individuals will build and manage a new business by voting on the plan, who to hire, products to create, how to market them, etc. It’s really a wild notion. I hope some journalist will pick up on this, interview the creator, watch the creation of this business over time, and write some interesting story about it.

Here’s the email I got from the founder. I don’t know enough about it yet to endorse it, but I like the experiment at first glance:

I’ve been searching the blogosphere for people interested in entrepreneurship and unique ideas to promote something new, www.thebusinessexperiment.com. It’s an open source, “wisdom of crowds” approach to business. It may fail miserably, or it may change the way we think about business. I don’t know, but it is my attempt to get these ideas more attention. I hope you will check it out and, if you like it, register and participate.

My initial post explaining it can be found at http://www.businesspundit.com/archives/002142.htmlBest regards,Rob May

Check it out and tell me what you think.

Looking for Utah Recruiters

I’m trying to compile a list of 10-20 recruiters in Utah. I’m going to contact all of them to see if they might be interested in the Team Building Event that I am planning. The more qualified applicants we get for this founders retreat, the more successful it will be.

But I haven’t yet figured out how recruiters could be involved, since they will want compensation for any help they give. But, maybe one recruiter could be a sponsor/underwriter of the event, and maybe their own database of talent could grow as a result of being involved.

Do you know of any Utah recruiters that do a lot with high tech? I know of Management Recruiters in Park City, and I read an article (I think in Connect Magazine) about two women who started a recruiting company recently in the Salt Lake City area. But I’m anxious to get in contact with any others.

According to Never Eat Alone author Keith Ferrazzi, every entrepreneur should know a recruiter and a fund raiser, since they are among the most connected people of all.

What other recruiters in Utah are you aware of?