Growth5 Blog

Friday, July 31, 2009

The VC Industry is NOT Broken

According to a survey conducted by executive search firm Polachi Inc., more than half of venture capitalists believe that the VC space is broken. Nearly 60% of VCs said they are less confident in the VC industry today than they were six months ago.

Jason Mendelson of Foundry Group explained here why he feels the VC industry is not broken. He makes some great points. The highlights:
1. It's never been cheaper to start a business.

2. Lots of entrepreneurs out there. College graduates are creating their own opportunities.

3. More "been there, done that" entrepreneurs to fund.

4. VC space is not dependent upon credit market or other systematic risk areas of finance.

5. Broadband, mobile connectivity and advertiser attention is coming together.

6. This asset class has a 10-12 year life span, worrying over short term issues is a waste of time, especially since the industry has produced the best returns on companies where the investment was made during a downturn.

7. Sure, exit markets aren't great right now, but according to many bankers, there appears to be wave of M&A on the horizon.
The "glass is half empty" folks in the VC space are likely those that are later-stage and are sitting on billions of dollars they can't allocate. Yes, for them, the VC space is difficult right now, especially because of #1 above. You don't need $50 million - $100 million to start a potential blockbuster business these days.

To Jason's point in #7 above, I too have heard the enthusiasm from various bankers about their current M&A business and its growth.

Our VC firm, Growth5 Venture Capital Marketing, is in the "glass half full" group. It is a great time to partner with entrepreneurs.

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Thursday, July 30, 2009

Still Private, Facebook and Twitter Stock For Sale

SharesPost, SecondMarket and XChange are private stock exchanges that have launched with the intent of solving the VC liquidity crisis. The exchanges provide an alternative way to trade private shares in startups like Facebook, Twitter or LinkedIN for cash — without having to wait years for the eventual IPO.

These exchanges can be a great place for private investors or employees of popular startups to trade their shares. Many of these employees get paid a portion of their salary in stock options that wouldn't otherwise be marketable until the company went public.

It will probably take awhile for these exchanges to see heavy trading as only Institutional Investors and Accredited Investor individuals can purchase these shares. You are an accredited investor if you are worth more than $1 million dollars, or have made over $200,000/yr each of the last two years.

If these exchanges can garner support from the Institutional Investor community, it could help the economy by unlocking capital that private investors have in these startups to be invested elsewhere and by Institutional Investors being able to fund younger startups that aren't yet public in a more liquid investment than the current "locked up" private-only alternative.

IPOs in the US have dwindled, exacerbating the liquidity issue in the VC space. "More than a dozen companies have priced IPOs in the U.S. this year, down from 35 in the first half of 2008, according to research firm Renaissance Capital. In the same period of dot-com-crazy 2000, there were 219 IPOs in the U.S."

These exchanges sound like a great idea, however, they are not without significant challenges. Some private companies have a "right of first refusal" on their stock to avoid stock being sold to competitors or to prevent the number of shareholders from growing over 500. "Private companies with more than $10 million in assets are required to file annual reports with the SEC if they have more than 500 shareholders of record. This rule prodded Google Inc. into filing for its IPO in 2004, and it could happen to others as these exchanges distribute shares among more shareholders."

The larger issue for buyers is verifying the value of the sale price being asked by the selling shareholders without being able to see the private company's financials or other important disclosures that private companies are not required to provide.

I would guess that a lot of the initial transactions will be based on what private investors feel are "no-brainer" investments in Facebook or Twitter at whatever price shareholders are offering. Caveat emptor.

Source: Associated Press

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Wednesday, July 29, 2009

Is Hiring Easier Right Now? Not Really

This Entrepreneur article titled, Find the Right Person in 6 Steps brings up some good points about hiring in today's economic environment. The article points out that just because there are more applicants for each position you post, it doesn't mean any of them are the right person for the job.

"...hiring the right person is more important than ever. A single bad hire can cost between $60,000 and $120,000--that’s not exactly the way you want to spend precious dollars in a difficult market."

Here are the six steps for finding the right person:
1. Define the requirements carefully. It’s important to detail the specific job requirements and desired personal characteristics. Needless to say, it’s also critical to determine if the candidate will be a cultural fit as well.

2. Look for repeated patterns of success. Find the applicants who have repeatedly made a mark and exceeded expectations, time and time again. Drill down in the interview to ask those questions; find out how they measure their own success and whether their employment history tells a story of a superstar.

3. It’s the network. You should rely on inbound candidates even less than you ever have. Your friends and their friends know the fantastic players who are searching for their next opportunity; tap into them and save yourself a lot of paper time.

4. Find a recruiting platform that allows for pre-screening. Use a recruiting system with pre-screening questions and candidate rating capabilities. This allows you to focus on the exact capabilities you need and only review the candidates who have passed the initial screening, saving yourself massive amounts of time.

5. It’s still about the passive seekers. If there's someone you meet an event but is working elsewhere, see what you can do to bring them aboard. The reality is, the truly premium talent is still scarce, and always will be. If your bar for talent is as obscenely high, passive seekers can make or break your search.

6. Don’t settle. These tips work in both a good and lousy economy. But let’s be honest: When the good times roll, it’s easier to find someone and say “good enough.” But in a down economy, you should never do this. Take the time you need to find the right candidate, either active or passive, and make the right hire.
Related: Interesting article from This is going to be BIG on if it makes sense to pay for job postings anymore ("post and pray"), how social network profiles are a great place to start your search, Craigslist, Indeed.com, etc...

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Tuesday, July 28, 2009

How to Use Social Media: Mayo Clinic

Guy Kawasaki interviewed Lee Aase, the manager for syndication and social media for Mayo Clinic. Aase is also the chancellor of Social Media University, Global (SMUG), an institution that provides training in social media.

You can check out the full interview here. Some highlights:
1. Social media is consistent with what has built Mayo Clinic's reputation for over a century, word-of-mouth. At the turn of the century it was unusual for patients to survive a hospital stay due to infection. The Mayo brothers and the Franciscan sisters pioneered aseptic surgical techniques which meant that many more patients lived to tell their stories. And when they went home, they spread the word about their experience.

Today word-of-mouth recommendations are the most important source of information that makes Mayo Clinic the top choice for diagnosis and treatment of serious diseases.

Social media combines the potential worldwide reach of news media stories with the personal touch of a friend’s recommendation.

2."We didn’t just immediately jump into blogging, Facebook, YouTube, and Twitter. It was a natural, gradual progression that incorporated what I like to call, 'The MacGyver Mindset' - creating new solutions out of resources we already had on hand."

3. "Our first “new media” foray involved creating an RSS feed for the radio segments to publish a podcast...Within the next year or so we established a Mayo Clinic Facebook page, YouTube channel, and Twitter account...For the Twitter account, we started with an RSS feed. For the YouTube channel, we uploaded our Medical Edge segments. With the rapid growth of Facebook, we saw a “fan” page as a way for people to share their stories on our wall, and for their friends to see them."

4. "The total out-of-pocket cost for Twitter, Facebook, and YouTube was $0."

5. "Another key low-cost tool that greatly extended our social media presence is the Flip video camera which lets us shoot miniDV quality video, edit and upload to YouTube quickly and easily. We also can provide the raw video files to journalists for incorporation into their online stories."

6. "The key to these platforms is that they enable us to connect with our community. The community creates and responds to the content. We sometimes use tools like the Flip video camera to facilitate their participation, but the stories come from volunteer contributors, whether they be employees or patients."

7. Aase was asked: "What’s your advice to organizations that want to achieve this kind of success with social media?"

Answer: "It’s not an overnight process, so start by listening and taking advantage of the free or low-cost tools. By keeping your costs low, you will be able to create the breathing room you need to have time to achieve results."

"...if you use the social tools with your existing staff as a way to accomplish your current work more effectively, you will get some wins that will enable you to expand your scope."

"The real power is being able to create [content] that may reach only a few thousand views, but they’re seen by the people who are most interested. That’s another reason for keeping the costs low, so that this niche content can show positive results through what Chris Anderson called The Long Tail."

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Monday, July 27, 2009

Context In 60 Seconds or Less: Go

Listening to entrepreneurs talk about their business can be extremely frustrating at times. Same goes for sales people and anyone else who is pitching something. It's because they start pitching at the beginning of their story, career, idea, life, etc... Those that "pitch" well have something in common: they lead with the punchline.

When you come to sell us something, as listeners we are constantly trying to make connections with what you are saying to what we know in order to understand the true context of the conversation. Once the context has been established, we have a much better chance of deciding if it is something we want.

If you don't get to the context quickly, we may have already decided we don't have the time to connect the dots for you. That might sound harsh, but it is true. If you are an entrepreneur, your pitch gives us an idea of how successfully (or not) you will be at selling your product/idea to the rest of the world.

The dictionary defines context this way:
the circumstances that form the setting for an event, statement, or idea, and in terms of which it can be fully understood and assessed
Lead with who you are, what you do, why you do it, and what you want. This can easily be done in 60 seconds or less. You'll be surprised at how much you can say in 60 seconds. You should practice. If your watch doesn't have a second hand, you can use the stopwatch on your iPhone.

If you can nail the context of why you are in the room in the first 60 seconds, we can spend the next 14 or 29 minutes efficiently drilling down further into what you are offering in a productive way.

Related: Prepping for a First Meeting with a VC

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Thursday, July 23, 2009

Social Media Timeline

Last week, Dr. Sean Carton, the Chief Creative Officer of our web division (idfive), posted the following Social Media Timeline graphic at the idfive blog - attentionscan.com. Sean created the graphic as part of his preparation for speaking at the 2009 eduWEB conference in Chicago.






















Sean wrote:
"It's definitely NOT to scale and I'm sure that plenty of people could quibble with what I chose to include as examples of "social media," (I define "social media" as "technologies that facilitate conversations") but I think it provides a pretty interesting overview of where this stuff came from and how long it's been around."
What I took away from this graphic is that it's important to remember that these applications/sites go in and out of favor over time. The next crop will undoubtedly have different bells and whistles - advanced features, "cooler stuff", all of which will better facilitate conversations.

As marketers we need to put the product where the right audience will see it, hear it, read it. This used to mean tv, radio, and newspapers as the major focus. Sure, people still watch tv, listen to the radio and read newspapers (I think), but not as much as they used to.

Our audiences today might be on Facebook, or Twitter or ESPN.com. We need to be creative about helping our clients integrate their products with these sites/apps in a way that fits in with the community and improves the conversation.

The great part about marketing today is the ability for our clients to have these conversations with a large chunk of their audience in a meaningful way from their desk. And with search, if you do it right, the audience will be able to find you from their desk and join your conversation.

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Tuesday, July 21, 2009

Approaching VCs

Mark Suster of Both Sides of the Table wrote this interesting post on how to approach VCs. Some highlights:

Your ability to approach VCs successfully is likely a decent sign of how you will:
  • succeed with tough-to-reach clients when you're selling your product;
  • find journalists to write stories about your new firm; or
  • get top-tier employees to join your firm when you are short on cash and nine months from bankruptcy.
Getting in the door is a test of your entrepreneurial skills. Here are some people that can help:
1. Start-up oriented corporate attorneys. If they think you will be a paying client it is in their interest to help you in your VC search. You can get great local info from them about who they think are the top VCs in your area of expertise and which person at the VC firm would be the best for your deal.

2. Start-up focused recruiters. Some recruiters aren't that great and have given the good ones a bad name. The good ones know everyone and can make that warm introduction to a VC. If you don't know a good recruiter, ask the folks in #4 below, they will.

3. Portfolio companies. You can always approach senior management of a VC's portfolio company and ask them to a 30-minute coffee to talk about fundraising. Bring something to the meeting that's helpful to them. Develop a relationship, ask them for an introduction to their VC. A lot of VCs rely on their CEO network for deal flow.

4. Fellow entrepreneurs. Talk to a bunch, you will start to get an idea of the good VCs in town, the ones to avoid, etc... Finding entrepreneurs who have just been funded would be ideal.
My strong advice is to try any of the four paths listed above. Blindly sending your business plan has very little chance of success. For me personally, I am not just investing in your idea, I'm investing in you. Very few business plans, if any, stand on their own.

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Monday, July 20, 2009

What Sort of A Day Was It?

The news that Walter Cronkite died at the age of 92 more than marked the end of a man's life. It was the end of an era. For those of us who grew up with a daily diet of Walter, he represented what was great about the press -- and what seems to be a fading shadow now.

Walter was credible, straightforward, and transparently clear. He was not sexy or even cute. His haircut looked like what your barber might give you. He had a wonderful, unique voice that came straight from his heart. He was a strong man working for a strong, young news organization.

Today, as we watch venerable old journalistic institutions crumble and others pander to baser tastes in a desperate grab for viewers or readers, he is a reminder of the glory days of his craft. And, importantly, he should be an inspiration for what its future could be.

Back in the 50's, on the grainy little black and white sets, Walter's "You Are There" program would always end with him declaring "What sort of day was it? A day like all days, filled with those events that alter and illuminate our times ... and you were there."

We were
there. We'd like to be there again.

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Wednesday, July 15, 2009

Google Voice App Available for Android & Blackberry

Google Voice (previously Grand Central) just released their mobile app for Android & Blackberry phones with the iPhone on the way.

The new app allows users to make calls directly from the address book of their cell phone but have the recipient see their Google Voice number instead of their cell phone number. This option has not been available to-date.

This is important because the idea of Google Voice is to allow you to have one phone number that when people call you, it rings all of your phones. The complication was that when you call back from your house (do people still have house phones?), office or cell the recipient would see and store those 3 separate phone numbers under your name. This app solves that issue for your mobile phone.

Google Voice has some cool features for visual voicemail and in-call options that we wrote about awhile back. Say you're in the car on your cell on the way to the office, when you get to your desk you could switch the call to your office phone and put your cell on the charger.

So what is Google after with Google Voice? Some suggest they are marginalizing the carriers as just "dumb pipes" that deliver the data to Google Voice and Google takes it from there. Google is great at getting in the middle and profiting. See their success in search.

Om Malik of GigaOm thinks Google wants to become your phone company:
"I have been playing around with the Android App for about an hour or so and I can see the broader implications. When I was setting up the app, one of the options I was given: to make all calls through Google Voice. And that’s when I thought to myself: Oh! OH!"
Screen grab of Google Voice from GigaOm















Source info & related:
-Washington Post
-NY Times
-ZDNet
-GigaOM
-PCMag: Telcentris Takes on Google Voice with VoxOx 2

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Monday, July 13, 2009

Verizon MiFi Because AT&T Coverage Is Horrible

It's a good thing the iPhone is a great device because AT&T's coverage is terrible. And even when you get a handful of bars -- calls still get dropped -- but that's a whole different blog post. One of the further problems with AT&T's network and iPhone functionality is when you're not using a WiFi connection you can't download large files or use certain apps like the Slingbox app.

You should check out the Verizon MiFi 2200. It takes advantage of Verizon's far superior (to AT&T anyway) EV-DO broadband network and converts it to a Wi-Fi signal that up to five people can use. Extremely helpful when you're traveling and you and/or your team needs broadband wireless. When don't we need it these days. All you have to do is turn it on and the signal is there.

The MiFi charges per data usage and in my opinion is a bit pricey. Currently, a max of 5 gb will cost you $59.99 a month. On top of already high phone bills, that $60/month could be a dealbreaker. If you travel a lot, it may be worth the money to know you can get broadband just about anywhere and share it. When prices come down devices like this will be in high demand.

It's a shame Verizon Wireless couldn't/wouldn't make a deal with Apple for the iPhone. Until they do, devices like the MiFi 2200 will give us the support we need for the network we wish the iPhone had.

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Wednesday, July 8, 2009

Can Google Eat Into Microsoft's Operating System Monopoly?

Google announced that they are releasing an operating system software - Chrome OS - this fall or early 2010 that will run netbooks and eventually full-size desktop systems. Google is suggesting that this new operating system, based on their browser called Chrome, will change the way personal computers run.

Google also claims the operating software is faster and more web-friendly than Windows. The system supports cloud computing and will be available as open source technology soon.

Changing the way personal computers run is not a bad idea. PCs were built with an operating system that didn't have the web in mind. Browsers were built to get PC users onto the web. Google is creating an operating system / browser with cloud computing and the web as its focus which could eliminate viruses, malware, and security updates that current operating systems (mostly Windows) face.

As we move towards cloud computing (applications that exist and run on the web) the interface we use becomes more and more important. A good portion of the documents we share in our business are in Google Docs. We run our business with an application that is online. And since Chrome OS will be free, the price is right.

Much like a lot of Google offerings, the change might not be overnight as we are wired to resist change, but over time Chrome OS has a decent chance of replacing Windows on some of the computers around the world. Time will tell how many.

Related:

-CNET thinks Microsoft has nothing to worry about

-The NY Times argues that Google cheapens its brand by offering products for free

-The Wall Street Journal thinks Chrome OS could help start-ups

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Monday, July 6, 2009

Memeo: Share Photos & Videos

You should check out Memeo. It's a great app to share your photos & videos from your desktop with family and friends or with the public if you choose. If you want to back up your photos / videos online, Memeo provides that service as well.

What's great about this service is that you manage your "circles" of friends/family or other groups right from your desktop.

Here is a chart from the Memeo site that demonstrates the difference between Memeo & other services (click on table for higher resolution version):

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Thursday, July 2, 2009

Users Equal Revenue; Viewers - Not So Much...What does this mean for Twitter?

At one time delivering eyeballs was all you needed. Online advertising revenue paid the bills. Now, you need users. People who will use your product every day. You can can put revenue possibilities in front of these users. Viewers are harder to get money from because they expect the web to be free.

This is why Facebook has great potential with its users and Twitter as it is currently configured does not with its viewers. Eventually, someone will buy Twitter and try to turn its viewers into users.

Awhile back we wrote about the first social networking to reach a billion dollars in annual revenue - China's Tencent - who built their social network experience / activity around small purchases as eyeball revenue was never that big in China.

Facebook should be able deliver small purchase opportunities to its community. From the Facebook site:
1. More than 200 million active users

2. More than 100 million users log on to Facebook at least once each day

3. More than 5 billion minutes are spent on Facebook each day (worldwide)

4. More than 1 billion pieces of content (web links, news stories, blog posts, notes, photos, etc.) shared each week

5. Every month, more than 70% of Facebook users engage with Platform applications
This is an active bunch.

Twitter will need to turn its viewers into users. If most of Twitter's "users" don't use the service, are they users? Ars Technica contemplates the question of "what makes a Twitter user a user" in this article. Some highlights:
1. The microblogging service has grown exponentially over the last year, but a little more than half of its users have never sent a single tweet, according to the latest report from HubSpot (PDF)

2. According to HubSpot's analysis of Twitter's 4.5 million accounts, 54.9 percent of users have never tweeted and 52.7 have no followers whatsoever.

3. HubSpot's data supports findings from Hitwise in 2007 saying that a large majority of Web users like to sit on the sidelines, especially when it comes to user-generated content. At that time, Hitwise said that only 0.16 percent of YouTube's total traffic was made up of users who uploaded videos; the same applied to photo sharing site Flickr (0.2 percent), and even Wikipedia remained relatively low with only 4.59 percent of users being active participants.
YouTube, Flickr and Wikipedia are very popular sites with lots of viewers; they will need more users to be profitable.

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Related: Slate put together this article on people who signed up with Twitter, posted once, then never returned - dubbing the posts Orphaned Tweets.

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