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October 28, 2004
Ignition Raises $300MM Fund
My contributing colleagues on this site are too modest to toot their own horns, so I'm happy to do it for them! Ignition Partners just announced they have raised a third fund of $300MM. This article in the Seattle PI does a great job summing up the Ignition story, their unique approach to true seed and early-stage investing and their emergence as a top-tier national fund.
This new Ignition fund is great news for Seattle, great news for regional entrepreneurs and great news for other funds like ours that will look forward to making follow-on investments in Ignition's early-stage companies. Congratulations!
Posted by stephen at 7:06 PM | Comments (0) | TrackBack
October 21, 2004
Musing about India
Just got back from India. A friend's wedding in Goa. Every morning I picked up a copy of The Economic Times. Every evening I chatted over drinks with various young professionals attending the wedding from across India, Europe and America. A couple of things struck me as important:
- The Indian economy is firing on all cylinders. Auto sales, pharma sales, real-estate, outsourcing and IT jobs are up double digits YonY.
- India's growth is accelerating even as China comes on line.
- Indian companies are moving up the value chain, especially in IT. There is a consolidation going on at the top of the IT outsourcing business by Wipro, Infosys leaving the middle market and small players looking to product development for growth. Look for Indian companies to get into original branded software product development in a big way (look out America).
- The bio/pharma sector is probably hotter than the IT sector. A partner in a leading executive recruiting firm said he has triple the number of searches going on in bio/pharma versus IT.
- The VCs that only visit Bangalore and think the India story is only about BPO are missing the mark.
- The Indian government is serious about divesting state owned enterprises (the old bedrock). Twelve new ones are being offered in the next three months.
The most interesting one to me was the fact that every day in the Economic Times of India was another article on an Indian IT company moving up into product development. And details of all the government programs to support this. While the culture of development is significantly different from the culture of a call center, it is probably just a matter of time. The recruiter I was talking to said most of his "C" level hires are returnes from America and Europe. Salaries go MUCH farther in India. India produces more computer engineers than America. It is only a matter of time before this combination of American trained management and inexpensive raw talent starts to deliver really cool products.
While I didn't spend alot of time looking for investments or talking with potential partner companies, it was clear to me that there is WAY more going on in India than most people are considering. I advise every start-up I work with to consider what their strategy to leverage India and China is. It can be as simple as outsourcing QA/testing or call center. It can be as complex as outsourcing all development and selling into the local markets. Whatever the strategy, the CEO who doesn't leverage the growth and market efficiencies going on in India/China does so at his peril.
Posted by Martin at 10:28 AM | Comments (1) | TrackBack
October 12, 2004
WSA Wireless Sensor Network Panel
I moderated a panel today on Wireless Sensor Networks for the WSA conference: "tech future: crossing the wireless chasm". Am posting my discussion outline from the panel below.
________________________________________________________
Panelists:
Dr. William Colleran
President & CEO, Impinj, Inc.
Mike Dierks
Director, Strategic Investments, Intel Capital
Marilyn Sheck
Director of Information Technology, Seattle Public Library
Zachary Smith
Chief Software Architect, Ember Corporation
Javed Sikander
Microsoft Corporation
Many buzz phrases being used in the press: sensornets, embedded computing, edge computing, proactive computing, ambient wireless, pervasive wireless, smart dust, M2M, D2D, intelligent RF, ZigBee, and so on...
Main point is the mass proliferation of non-PC based computing onto the network.
Interesting for two reaons:
Diversity of Applications. Supply chain and inventory management, asset tracking, building automation, industrial controls, home monitoring, security/defense, the list goes on …
Product volumes are potentially enormous: billions of consumer product pallets and eventually products will be tagged, billions of microcontrollers each year in machines and industrial equipment not currently networked or intelligent. Low-cost wireless chipsets are poised to drive the emergence of a new “Device Web” where disparate data can be monitored, collected, and acted upon by automated, intelligent devices.
I. Market timing. Reality vs. hype. Are we about to see an explosion of volume and penetration in RFID/wireless sensor devices or are we still in the very early phases?
II. Applications. What will be the near-term drivers of these markets? The Wal-mart impact on RFID? Building automation? Home automation? What are the key catalysts? What are examples of unique applications already in place today?
III. Where is the technology innovation occurring? Will this just be a market of cheap, commoditized chipsets or are there complex application-specific technology and software issues that need to be resolved? How do we address development, implementation, tools, ease of use, etc.?
IV. Where are the investment opportunities? Will large corporate players dominate or is there room for the nimble start-up to successfully drive early growth?
V. Role of the standards. What is the current status (EPC Global, 802.15.4/ZigBee, etc.) and how crucial is broad standard adoption to market success?
VI. Privacy and Security. If we start tagging or networking anything and everything, what are the privacy and security implications? Are these concerns eventually going to disappear as the technology becomes more commonplace or will fears/breaches only get worse?
VII. Q&A from audience
VIII. The Future: looking 10 years out, what unforeseen roles might wireless sensors play in business and society?
Posted by stephen at 5:40 PM | Comments (1) | TrackBack
October 7, 2004
Strategy and Execution
We talk alot about market risk vs. execution risk when looking at companies.
What we mean by market risk is that you are betting on some change (often in consumer behavior) that will bring a big market along with it (e.g. betting on e-commerce in 1995 meant belief in a trend). By execution risk, we mean that a big market already exits but that you are betting on the ability to out execute others in capturing the pot of gold the market already represents (e.g. betting on e-Commerce today means finding some in or advantage that others don't).
There is always execution risk in every company but each will have more or less market risk depending on the situation. There really is no statement of which primary bet is better just that you need to be conscious of which and how best to mitigate.
Emergic recently highlighted a very intersting view of this from Fast Company:
"Never is execution more important than when innovation is at the heart of a strategy.
That is because innovation always involves treading into uncertain waters. And as uncertainty rises, the value of a well-thought-out strategy drops. In fact, when pursuing entirely new business models, no amount of research can resolve the critical unknowns. All that strategy can do is give you a plausible starting point. From there, you must experiment, learn, and adapt.
Execution. For a proven business, it is about performing at or above known standards. Many large, established organizations are able to sustain success because they are ruthless about holding their managers accountable to meeting or exceeding standards.
Executing an experimental business is different. It is about zeroing in on the best possible strategy. And in the process, discovering what standards are possible."
Posted by at 9:24 PM | Comments (0) | TrackBack
Finding the Right VC
Jeff Nolan recently wrote a widely-linked post on "Picking Your VC" which brought up some very good points about the importance of the entrepreneur/VC relationship. He describes how it's not just about picking the best-known, name-brand general partner, but about working with a VC who truly shares the team's vision and can meaningfully contribute at the board level to helping the company achieve success.
"Picking" the right VC is clearly an important piece of the equation, but seems to imply that you've already found the right VCs to meet with in the first place and have the luxury of choosing among multiple competitive term sheets. I believe actually "finding" the right VCs to present to is typically the more challenging and critical piece of the fundraising equation.
The approach I've witnessed is typically "spray and pray" where entrepreneurs will speak to any and every VC that is willing to listen. Talking to a broad range of VCs is not a bad thing as many often have relevant relationships or insights that could prove helpful even when they pass on the deal. But in my experience, I see too many entrepreneurs focusing a disproportionate amount of energy on trying to get in front of Brand Name VC "X" instead of focusing on identifying the specific partner within a specific fund that is actively targeting their space.
While the style of some VCs is to be sector-agnostic generalists and simply back the best teams they come across, most VCs today tend to be highly specific in what they are looking for and even aggressively proactive in sourcing appropriate opportunities. This means that getting in front of that specific VC who is probably already actively thinking about your business is a real possibility.
I'm aware of a recent example (not involving me) where a very interesting company went out to fundraise and because their application and business model were somewhat atypical and a bit off the radar of most VCs, the majority of their initial meetings were spent educating potential investors on why they are doing what they are doing, why it's interesting, necessary, etc. While VCs will always take a meeting where there's a credible team and trusted referral, many of these meetings immediately get off on the wrong track because it's about a space the VC is not actively thinking about or pursuing.
This same company then met with one well-known VC who had been actively thinking in depth about this specific market opportunity for over a year and had many ideas and initiatives around how to capitalize on it. Now this meeting was like a match made in heaven -- the two sides were immediately speaking the same langauge, finishing each other's sentences and already plotting the long-term strategy of the comapny within two hours. From there, the company actually signed a term sheet and closed on the financing within 5 weeks from the first meeting. In the meantime, the VCs from prior meetings were likely still scratching their heads about what this company was trying to do in the first place and had no intention of trying to get to term sheet stage.
So it is important to embrace the fact that what may be incredibly interesting and engaging to one VC may be boring, way off the mark, or even incomprehensible to another. Entrepreneurs should focus maximum energy on finding that needle-in-the-haystack VC who is actually already looking from them, but just may not know it yet. The quantity of investor meetings may be smaller but the hit ratio for getting a follow-up meeting is sure to improve.
This is, of course, easier said than done. The main ingredient is to network, network, network. This is the often-stated, no-brainer tactic, but cannot be overemphasized. One of the more recent companies I invested in came about because I had been telling anyone and everyone I could about a specific technology application I thought would be valuable for a start-up to pursue. Another VC told me about this company already doing it so I tracked them down and three months later became an investor.
Also, the early trend of VC openness emerging through blogs is a great step in the right direction toward better enabling entrepreneurs to find the right VCs. While VCs are not likely to reveal specific companies they are interested in, VC blogs do convey general interest themes which should be useful hints as to who may or may not be an appropriate investor. I predict the number of VC bloggers will increase dramatically in the next couple of years as it is a highly efficient communication mechanism to generate targeted dealflow and get the word out on what areas a particular VC is tracking.
Posted by stephen at 5:31 PM | Comments (1) | TrackBack
What's in a Name?
Naming is one of the most highly charged marketing topics start-ups face. Finding a name that isn't taken. Finding a URL that matches. Shifting from a wierd name that the founder really loves but no one understands or can spell.
We often ask ourselves when we see a plan, "Is this a feature, a product or a company?" The same can be asked of names. Here is an entry ripped off from the Marketing Playbook blog that gives some straight forward guidance on how to approach these problems:
Some naming realities:
· Names are for people outside your company
· Names are things you want an audience (i.e. people) to remember
· Names are things you brand and even trademark, they are things you invest in, if you don't they are just words
· Names communicate and simplify
Some people realities:
· People are easily confused - complexity does not work well in names
· People have a limited cache - they can't digest too many names at once
· People forget - they need to be reminded over and over again of the same one or very few names
What is "naming convention"? A basic framework that...
· allows you to know WHAT you are actually naming and not naming,
· helps keep these names consistent and compelling, and
· makes it faster and easier to name each time.
Keeping things straight. Generally the things you name are as follows (make sure you really know the difference between them and how they relate to each other):
· the company - this is the longest lasting name you have to have. You pour your values,
personality, mission, vision etc into this brand (e.g. Microsoft)
· the product line - a family of mulitple products that are related to each other (e.g. Office)
· individual products - the products within a family, either different variations or component
products of the core family (e.g. OfficePro)
· product versions - as the specific individual products evolve, this is the means of keeping track
(e.g. OfficePro 95)
· ingredient names - the green crystals or Secret Sauce. These should be lasting technologies or
concepts that cut across more than one product (e.g. Intellisense, Retsin)
· feature names - usually version specific functionality, that you want to highlight in promotion but
not in packaging (e.g. Pivot Tables, the Blue Dot)
· program names - not products, but supporting efforts that are worthy of naming, putting marketing investment behind. Often at the corporate vs. the product level (e.g. MSDN not Visual Studio Developer Network)
Some ground rules for a good naming convention
· Names should either be memorable or meaningful
· They should create the right emotion or communicate/imply the actual thing they are naming
· Company names should be flexible and bigger than the names of the products, they are receptacles that you put meaning into. They don't have to be as concrete as the product names (Salesforce.com is kicking themselves, they are going to have a hard time launching an ERP product)
· Invest in very few core names, build the rest of your convention around them
· Do not name stuff you are not going to support or invest in over the long term
· Don't work too hard. Even if you don't love the name, even if it doesn't make sense, if people already love it and are aware of it, keep it.
Posted by at 9:25 AM | Comments (0) | TrackBack
October 1, 2004
SourceLabs gets funding
Most of you probably saw this announcement this week. Industry veterans bet on open-source model | CNET News.com. While some in the press have played up the "ex Msft guys go into competition with Bill" angle, this is really not about OS competition. It is about stack support. It is about having a single neck to strangle for a larger number of open source applications, even if they are running on a Windows OS.
Posted by Martin at 11:41 AM | Comments (0) | TrackBack