One eyebrow-raising moment at last night’s Hoboken Tech Meetup was when former Huffington Post CEO Eric Hippeau said that in his new gig at Lerer Ventures, he funds one company per week.
It is a good time to be a startup. Or at least the kind of startup that Lerer Ventures is interested in—those with founders that want to take on huge markets.
Hippeau has led a charmed and fascinating life. This Sorbonne-educated but very worldly media entrepreneur worked his way up from running an English language paper in Brazil (when he was just 20) to taking the CEO helm at giant tech publisher Ziff-Davis.
As you might expect, his presentation on the disruptive power of software was backed up by interesting stories. Like the time he was working at Softbank trying to convince Jerry Yang, who had a company called Yahoo, to take a $100 million investment.Continue reading
I had a lot of fun listening to Craig Kanarick, the co-founder of Razorfish, the proto-interactive agency, at last night’s Hoboken Tech Meetup.
I could definitely envision him pitching Fortune 500 companies during the dot-com years and explaining the Web to the “suits”. Did he really do a presentation once-upon-a-time with his hair dyed blue?
No matter. He’s still at it, and yesterday he radiated lots of thought beams on the current digital technology environment. As part of his talk, Kanarick delivered a completely entertaining and spot-on summary of our post-WW II consumer economy—rise of marketing, power of brands, and now the preeminence of real-time on-demand media.
One idea of his that most resonated with me, considering the context of speaking at a tech meetup and having just followed a few demos, is the challenge of being a tech entrepreneur when there is so much open and available IT.
Hearing angel investor David S. Rose (@davidsrose) speak last night at Hoboken Tech Meetup was the equivalent to speed reading a course in startup financing, marketing, and management in under an hour.
Rose has a lot to say, and he communicates in complete sentences, leading to fully-developed paragraphs with footnotes. In other words, the 100 or so entrepreneurs gathered at Stevens Institute of Technology’s Howe Center absorbed incredibly practical information (with just basic analog voice technology and a few slides).
Rose focused on the finer points of raising private money. He should know. Through his various incarnations—as founder of New York Angels, CEO of AngelSoft, and through his own super angel firm, Rose Tech Ventures—he’s been involved with funding over 80 companies.
David Rose and the essentials of a good pitch.
Did I mention that he also has a reality TV show on the MSN website, called Second Chance, in which he works with entrepreneurs whose first ventures failed, guiding them to startup redemption?
At HTM yesterday, Rose filled in more than a few gaps in my understanding of the startup money race.
Rose started out his career at the receiving end of the financing relationship, founding eight companies, including AirMedia, one of the first wireless data networks, as well as helping to boot up the NYC tech scene.
And then as he put it, he moved over to the dark side, as a private tech investor.
According to an Angel Capital Association survey that Rose presented, most angels, which is really shorthand for individuals with high net worth who invest in private companies (or in SEC terms, “accredited investors”), are much like him: former successful serial entrepreneurs (2.7 ventures ), well educated, older (mid-50s), running at a 100 GHz, and typically investing 10% of their net worth for up to nine years in ten ventures (for a total portfolio of between $100,000 to $1 million) with younger versions of themselves.
Their motivation is profit and fun and contributing to the pool of startup karma.
Though you begin to wonder about what Rose and other angels’ idea of fun is. And there are less hair-raising ways to get a positive return on investment.
It’s not an easy life, and you sense that Rose has heard many, many pitches: I imagine him having listened to every possible permutation of social networking out there.
So what does it take to get funding from Rose or other seraphs?
If a startup decides to seek outside investors—it is possible to bootstrap a company based on, um, selling something and getting revenue or, surprisingly, applying for government grant money—it will have to first pique an angel investor’s wandering interest with a written description of the venture.
While all startups should have a detailed business plan, angels don’t read them since they’re too busy. A shorter executive summary may be glanced at and a one page precis could in theory capture the attention of an angel but something even shorter, say a well-written two-paragraph email, has a better chance 0f gaining an audience with an angel.
If the email or some other method does get you that rare in-person angel meeting, then a tight 30-second pitch that is completely on message about what it is the company does and why you’re the one to do it, may lead—there are no guarantees in any of this—to a formal date.
For that, you’ll need to prepare “the presentation”—i.e., generally slides but other media can be used. As with dating, there are rules to this.
According to Rose, presentations should have in the following order: name and company logo, opening hook (a surprising fact or two), what your company actually does for a living, your management team (why they’re indispensable), a clear overview of the market (as in dollar size), the market pain points (what the startup is trying to solve), the product that relieves the pain (some images of the app, website, or physical product should be inserted), the business model, current or potential customers, marketing strategy, competitive challenges (be honest), barriers to entry (intellectual property or domain expertise or something else that makes this venture unique), and financial projections (sales charts). Additionally, a “pre-money” valuation (see below) can be included but this only makes sense if the startup has a deal in progress with another group of angels who have independently blessed the founders’ estimate of the worth of their business.
On that last point, there are brutal economic facts that determine what investors want for their return on investment. If a typical angel has say 10 investments locked up for a few years, he or she knows that half will fail, a few will return their capital, leaving just one with the burden to bring home the bacon.
If you do the business school calculations (assuming a 25% internal rate of return over 6 years), it mean that the one successful company will have to pay off 20 to 30 times on the initial investment.
On the assumption that a startup convinces two or three investors to fork over a total of $1 million, a startup should have a planned exit valuation of about $30 million for just the investors. The founders and their management will have their own payday of course but that depends on the pre-money worth of the company: in other words, the dollar value of what they brought to the table.
If a startup and these celestial beings can come to terms on an appropriate pre-money valuation—$1 million to $3 million is the range of most of the pre-revenue tech deals these days—then the startup can enter a serious long-term relationship with the angels.
It can happen. Hoboken Tech Meetup’s Arron Price is trying to arrange a low-cost creative working environment in ‘Boken with a local business person. The …
I first learned about Megaphone Labs’ DialPlay TV product last month at HTM. This startup turns a boring DTMF keypad from your cell phone into a remote control for TV games, surveys, and trivia contests.
The same idea of reading a massive number of dialtones in real-time also works at sports venues with giant LED displays standing in for the family-room TV.
If you were at New York City’s Times Square to watch the ball drop, you would have witnessed MegaPhone’s software in action on a building-size screen.Continue reading
I’ve read many, many tech white papers sprinkled with the conventional bizspeak phrase, return on investment. But at Hoboken Tech Meetup last night, I came across a new metric, social return on investment or, in acronymese, SROI while listening to founder Malcolm Arnold discuss his company RubyNuby.
RubyNuby is a social good company that teaches Ruby on Rails programming to at-risk and disadvantaged youth. The startup matches teens with professional mentors, sponsors start-up competitions, and gets its youthful members high-paying jobs.
There were other startups with big dreams and compelling demos. You should’ve been there!Continue reading
Xydo is a recommendation startup I first discovered at Hoboken Tech Meetup. Since then I’ve partially trained GetGlue and Hunch to respond to my tastes (not successfully), perused Parse.ly’s recommendation app for filtering feeds, and gauged Google’s own Prediction APIs and Set suggestion tools (pretty good stuff).
So when I received the beta invite from Xydo, I was almost at the beginnings of an existential crisis: do I really need a web site to show me other URLs to look at? After all, I was heavily reliant on Google Reader to bring the feeds I like to my attention. I wasn’t sure whether I required additional content advice.
I would want Xydo and other such sites to be my web magazine 2.0, bringing both content that I absolutely need yet also uncannily anticipate what I may want.Continue reading
One of the benefits of joining Hoboken Tech Meetup is learning about tech startup activity and entrepreneurial opportunities on the other side of the Hudson. …
I’m liking the Hoboken Tech Meetup experience. As I remarked in my last HTM post, there are advantages with smaller groups and a limited roster of speakers. The pace is less hurried, the demos more leisurely, the speakers can make extended points, and the Q&As have more educational value.
Obviously, I hope that HTM grows and prospers, but I would recommend NYCers take the Path or ferry and try this more intimate tech gathering. And the views of the NYC skyline from the Babbio Center are quite stunning.
Kudos to Aaron Price and his staff.
I’ll confess that I come to these meetups just for the demos, but at last night’s Hoboken Tech Meetup I arrived earlier and stayed later to listen to the speakers. To my surprise, I was able to understand some of the inner legal and financial aspects of the startup world, which were the subject of two of the talks.
Hoboken Tech Meetup is a nice counterpoint to the goings on across the Hudson. Though I enjoy the big-city excitement of the NYC version, the Hoboken Meetup I went to last night at Stevens Institute’s Babbio Center also had its share of fun, Jersey style.
I loved when Michael Streko of Knowem (Belmar), social media trademark protection firm, said he sucked at Powerpoints before he launched into his speedy presentation, which had maybe two slides. I get it: we’re not fluff-meisters, we got products that sell and make money.
On this point, Streko stated that his site was profitable within an hour two hours after launch.
Continue reading
I first learned about Megaphone Labs’ DialPlay TV product last month at HTM. This startup turns a boring DTMF keypad from your cell phone into a remote control for TV games, surveys, and trivia contests.
Xydo is a recommendation startup I first discovered at Hoboken Tech Meetup. Since then I’ve partially trained GetGlue and Hunch to respond to my tastes (not successfully), perused Parse.ly’s recommendation app for filtering feeds, and gauged Google’s own Prediction APIs and Set suggestion tools (pretty good stuff).