Archive for July, 2009

Invest globally or locally

Wednesday, July 29th, 2009
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We have now heard many times a question, why would people use Grow VC to make international investments when many investors want to invest only locally. It is totally okay to invest locally, for some people local is the same country, for some others 10 miles. It is anyway difficult to see that it is and will be the only model to make successful investments. An investment focus is not only a location, it can be an industry, competence, or business model. And it is absolutely fine to invest locally and use Grow VC to find companies, but we are the leader and really unique to offer match-making to find companies and investors around the world. And we see that it is a big new opportunity.Ilmassa

Many web and mobile companies are immediately global when they launch their service. And many companies look for smart money and many investors also claim that their offer much more than money, e.g. business competence and contacts. So, it definitely makes sense for companies to look for best resources and contacts around the world. If you set up a web business in Sweden, and you want to reach also the US and Indian market, it makes sense to find some investors in those places too. And if you are mobile apps investor in the UK, probably it doesn’t make sense to invest in the UK based companies only.

Of course, some things are easier locally. You can go to see entrepreneurs and control what they are doing. But the Internet and social networks have enabled many other things globally, even more complex things. So, it is not too difficult anymore to communicate, get information, or local contacts to help, when you find an interesting company in another country. And our service is mainly for the people who are Internet native; they are known in Internet communities and able to use the communication tools and communities. A year ago I said that one good opportunity in our service will be that American and European can, for example, find interesting Indian companies to invest in. Now many Indian investors have said to me that it will be vice versa, many Indian investors have a lot of money and have started to look for opportunities in the US and Europe.

Why people are still so local when they think start-up investments, when they make so many other things around the world. And if you buy listed shares or funds they are anyway around the world. Why would not you also consider interesting start-up companies in another country or continent?

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Strategy and funding, how to avoid chaos

Sunday, July 26th, 2009
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A strategy of a company is always linked to its funding. Sometimes the strategy forces a company to look for certain kind of funding, sometimes investors dictate the strategy, and sometimes companies must take a strategy when they have no funding and many models between those. Unfortunately, often start-up companies cannot plan and execute strategy and funding really systematically. Many companies just drift to one or another direction.

It is good that companies take into account the market and realities. If you cannot sell something, you must make some conclusions. But often better results are accomplished with more systematic work. And it also requires that companies should have better opportunities to find a funding strategy and model that fits to their needs.

Now a new company often starts with some small funding from founders and friends. Then they try to sell whatevet they can sell, i.e. consulting services, software pieces, and tailored solutions. They have a big vision, what they should do to make worldwide breakthrough. Then one day they can get VC funding. Then they should turn the company to execute a clear global strategy, not sell anymore whatever someone buys. And VC’s bring some “professionals” that don’t know the business, but have read many business management books and can make nice slides. And outcome is a chaos, everyone is disappointed.

So, what to do. One solution is to have opportunity to execute better defined strategy earlier and have a kind of step-by-step funding model. This means that also a company could already in an early phase get smaller funding and help from professional sources. It can be a top level business angel, VC’s seed money, or serial-entrepreneur that knows the business. Then all parties could develop the company more systematically by knowing what they want to do and have a plan to do it.

Grow VC wants to help to build these steps: find professional seed funding and then more money, get right people to find each other, and have tools to plan and communicate. What kind of seed funding you would like get in an ideal world? Is it a small sum from Silicon Valley VC,  several business angels around the world who can also help your business locally in their region, or wealthy serial-entrepreneurs who have a real track record to create something new?

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What kind of risk are you looking for?

Thursday, July 23rd, 2009
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Risk takingThe old story is that 9 of 10 VC funded companies fail, but the successful one makes so much money that the VC makes money. Of course, VC’s are very different from each other, but generally VC’s focus on firms that can make something disruptive and have a huge upside. Another end is small companies that have very limited risk (e.g. local coffee shop, or consulting business), and those companies can get bank loans. But there is a large gap between these two ends. A lot of companies can grow nicely, start to make profit, maybe never make IPO or be acquired by Google or TimeWarner, but can still bring a nice return to investors.

Grow VC wants to have services, investors, and entrepreneurs for different risk levels. We hope that investors that want to invest with a lower risk and lower ROI expectation can find suitable companies from the service. We also want to help entrepreneurs that want to better control risks and are happy for smaller but profitable growth to find the right investors. It cannot be so that all companies must look for top level VC’s and play the all or nothing game. But for some disruptive ideas it is exactly the right game.

The best way to find the right investors and the right companies is an open market, where match-making can happen. This is the basis of Grow VC’s service. We also want to offer tools that help in match-making. We are happy to get ideas on what could be a good way to categorize companies and investors based on risk and return in order to make match-making easier. You can post your ideas, or register and give them inside the service, or email us.

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Additional value of the funder

Thursday, July 23rd, 2009
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Image by: TOKY Branding and DesignI have been reading this great blog “Both Sides of the Table” by Mark Suster, a 2x entrepreneur who, in his own words “has gone to the Dark Side of VC”.

I like his blog, because he’s working hard to build real understanding between investors and entrepreneurs. The better both can understand each other, the easier it is to work towards the deal and beyond.

In one of his lates post “Raising Angel Money” there is a great quote by Ron Conway, the legendary angel investor from Silicon Valley (invested in Google, Twitter, Digg etc. early-stage SV success stories).

“If I invest in a company I open my Rolodex for them.  I help them with business development introductions.  I introduce employees.  I give them credibility in the fund raising process.  Let’s say the company was worth $1 million when I met them and I’ve helped them with both my Rolodex and my cash and they can now raise a round of venture capital at a valuation of $6 million.  I would be hurting my own interests.  A $500,000 investment at a 30% discount to a $6 million round is still priced and more than $4 million and is certainly worth much less than my investing at a $1 million pre-money where I could own 33% of the company.”

This is one important point for new entrepreneur to think about. There is real value on thing beyond money that really can make a big difference. However like funders, as an entrepreneur you should also make your own due diligence on the funders, to make sure they really can deliver what they say. I also suggest you to read the rest of the post as well.

Have you had good or bad experiences with this part of the value? Share what you have learned in comments below.

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The process from idea to competitive startup

Tuesday, July 21st, 2009
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Startup Financing Cycle
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Building a successful startup from an idea to successful launch and beyond is a mysterious process for many. There is so much information out there and it can be very difficult to obtain what is the right information for you.

First, it’s important to understand that depending on what type of company/business you are starting or launching, the process can be very different. Also we have intentionally left products, customers and other business related parts out of this process outline, to be able to focus on the other aspects of startup development.

In our Grow VC service, we are focusing on the type of ideas and companies that cannot normally use traditional funding solutions like business loans. The reason why these ideas don’t fit that type of funding is that the idea is so risky that there is no other reasonable option than to try it on the real market, and typically this kind of companies have no material assets to be a collateral. So, some sort of risk funding is needed.

When it’s risky to see if the idea will gain traction and momentum, the only logical thing to do from a risk funder’s point of view is to minimize all the other related risks involved, making sure that the idea will have the best possible chance of success.

This usually requires ensuring the team behind it is great, the timing for the idea is right, competition is manageable, and the most important item, “protecting the idea,” would be possible. However, the last one is becoming very difficult in today’s fast changing world and also less meaningful if the business can quickly gain critical mass (like a user base). It is also more and more difficult to patent and protect ideas and components in our “open source world.”

So based on these assumptions, we have outlined the process of building a startup that would have an optimum chance of success from the funding and growth point of view. And we are building our service by focusing on making this process as effective as possible, with the best outcome, when looking at the long term goal of international success.

Building the successful start-up

This process is the core of our Grow VC service development. This can be over simplified and there are many other factors as well. But I think it’s important for us to explain the main process that we at Grow VC focus on.

Building the succesful startup

  1. The first risk to avoid is to be too dependent on one entrepreneur where one would have such ownership that he or she alone could make all decisions. So the core structure / ownership will need to be built, so that also looking from a funders point of view, there is more than one committed entrepreneur. So at least a core team of two or three is advised (since a 50/50 split can be problematic as well). More than three depends on the business model, roles, ownership %, etc.
  2. Other team members. The next step is getting various other contacts committed to support and offer expertise and funding when needed, without too much effort. These people can typically be friends, ex-colleagues, business contacts, family and other close contacts that you have built. They are the type of contacts that you know and they know you. So real trust is based on those relationships.
  3. Next you will need other outside experts that are not in your personal, inner circle. They are the ones bringing in the “outsiders viewpoint” and the contacts that would normally be out of your reach without a bigger effort. You must be able to convince enough of these types of people and get them involved with your start-up as well.
  4. When you have shown traction with external experts , and they are committed to help you by sharing their contacts and expertise and recommending you to others, your startup has reached a level where you are starting to look more appealing to funders. Of course, this is only looking at your startup structure and people involved with it. The value of the idea and the quality of your product must be competitive as well.

Many times the roles between your contacts, experts and funders are not that clear, i.e. in many cases your original founders may also be funders, experts can be funders, etc. But overall the type of structure you will have at the end should look something like the above.

In Grow VC we will have components that are linked to different kinds of funding models in this process, e.g. the different roles for founders, funders, and experts, and tools to manage the process in different stages. For all the other elements in this process that are important but not core for us, we are looking for partners to join us to provide various solutions, services and expertise.

Some of the roles for our partners are already well defined and some of them are more open or not yet defined. If you are interested in partnering with us, please contact us and let’s see how we can cooperate in order to make the experience even better for everyone.

What do you think? Let me know in the comments below, if you feel I have left out some crucial elements that should be added to this.

In future posts, I will go focus to each stage of this process in more detail.

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The new era of ownership and funding: join the journey

Monday, July 20th, 2009
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This is a diagram of a Wikipedia:Peer-to-Peer ...
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Wired published a couple of months ago an article “The New Socialism: Global Collectivist Society Is Coming Online”. To be honest, I don’t like too much the word socialism in the title. But if we ignore the word, this is really relevant article. And it is especially relevant for mobile and web related start-up companies and their funding.

Wired writes:

“We’re not talking about your grandfather’s socialism. In fact, there is a long list of past movements this new socialism is not. It is not class warfare. It is not anti-American; indeed, digital socialism may be the newest American innovation. While old-school socialism was an arm of the state, digital socialism is socialism without the state. This new brand of socialism currently operates in the realm of culture and economics, rather than government—for now.”

And it continues:

“Instead of gathering on collective farms, we gather in collective worlds. Instead of state factories, we have desktop factories connected to virtual co-ops. Instead of sharing drill bits, picks, and shovels, we share apps, scripts, and APIs. Instead of faceless politburos, we have faceless meritocracies, where the only thing that matters is getting things done. Instead of national production, we have peer production. Instead of government rations and subsidies, we have a bounty of free goods.”

And the writer has also some examples: “Who would have believed that poor farmers could secure $100 loans from perfect strangers on the other side of the planet—and pay them back? That is what Kiva does with peer-to-peer lending. Every public health care expert declared confidently that sharing was fine for photos, but no one would share their medical records. But PatientsLikeMe, where patients pool results of treatments to better their own care, prove that collective action can trump both doctors and privacy scares. The increasingly common habit of sharing what you’re thinking (Twitter), what you’re reading (StumbleUpon), your finances (Wesabe), your everything (the Web) is becoming a foundation of our culture.”

I think Grow VC could be one example in that list too. But I would call it as a new era of capitalism, where individual people and companies have better tools to work with other individuals and also have better control on their own life and businesses.

People don’t have be to a small part of a huge organization as it has been during the industrial age. But we still need models to work together and we also need owners and their control in companies. But openness, transparency and peer-to-peer models can make more effective capitalism.

All this is quite theoretical and abstract. Anyway, at Grow VC we believe that this new era of the web business also needs new models for funding and venture capitalism. VC business has been very similar the last 20 years. Our vision is to get it to support the needs of today’s new companies. Our global match-making service for investors and companies is the starting point. And all feedback proves that it is really needed. But I can tell it is only the first step on our journey to re-write the rules of venture capital funding. You will see a lot of other things during the coming months, how we think the funding world must also be renewed. And we talk about openness, collectivism, and co-operation; we want that all of view participate into this development. We want to get your ideas, comments and contribution to make this development possible.

This blog is one forum to discuss and develop concepts. If you register into the service, we have an internal discussion forum. You can also email us and you can develop components for the service.

How far you think crowd sourcing and collective actions, assisted by Internet, can take us in the future?

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Update – Grow VC private Beta

Friday, July 17th, 2009
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Tip of The Iceberg

By stargazr441

A warm welcome to all new readers and members in Grow VC. It’s now been a bit over two weeks from our first beta launch, that we had scheduled for the 2nd Q of 2009. So it’s a good time to share some of the things we have experienced.

During our developments, it’s always been very important for us to be able to keep our planned dates and milestones. So as we were approaching the end of June, we started to finalize the material and features we had ready so far and put up the initial private beta service and our main site.

In typical startup manner we were pulling long hours to get everything to the point needed for us to pull this off. When it came to the day of launch we still had some minor hiccups, and missed our target launch time by a few minutes.

Other than that small delay, we could have not asked for more than what we got for our initial launch response -  we were all extremely exited to see the first posts written about our service and see people lined up in our server hitting “reload” in their browser to see when it went live (my apologies for those who had to wait a few extra minutes).

Here’s some of the posts written about Grow VC so far:

ReadWriteWeb
ArcticStartup
Museum of Modern Betas
The Startup
London Calling
The Next Women
Open Gardens

After the big push on working towards the launch, going through this first beta launch, seeing the great initial response from the markets, seeing people registering to our service and immediately starting to give us feedback, I feel personally very humble to be able to continue our journey with you, so a BIG thanks for those that have helped us so far and those registering to our service and wanting to be part of our venture to “forever change the early stage funding model.” After all this is just the beginning! And we are here for the long haul!

Now – after the launch, first being just exhausted after all of the work and hoopla, then enjoying the launch, registrations and feedback we are receiving – to pulling all of this initial feedback and thoughts back together, we have been fixing bugs and adding new features as fast as possible. Also we have had to do some new features we had not planned and restructure some of our existing features. We are very exited to continue our work towards the next milestones in our road map.

As we are running our private beta, we are taking new registrations in limited numbers by invitation only and we have released some invitation codes via above sites.  We have also invitations available via different Grow VC LinkedIn groups.

We are doing this invitation model during private beta, to be able to make sure we can continue to develop our service in an organized manner and communicate with users to help make our service better for everyone.

The road ahead

As we have launched our private beta and there is something to put your head around, there is so much more that we can and want to communicate about our ideas and thinking about what Venture Capital 2.0 means to us. In coming posts we will start explaining more of our thinking and sharing our ideas. We’d also love to get your feedback comments and ideas, on how can we do better.

At the moment, there are a few of the original core ideas with matching feature updates to our service from the early days, that we are still holding onto, so we can release those later in a more official manner. You can expect these bigger releases, first this fall, and the next one by the start of 2010. The reason we are holding back on revealing these, is that there are important open negotiations going on with several parties around the world related to these announcements.

Other than those few bigger ideas, we want to openly share as much as we can about what we are doing and thinking, so those that want can participate and be part of the change we are doing.

We want you!

What comes to you, as a reader, user in our service, being an entrepreneur, expert or a funder, we could not think of a better and more valuable audience, that we would like to be able to serve with our solution.

  • as an entrepreneur in general and particularly in web and mobile space, I could not imagine better people that can really challenge us to do our best and give us the type of feedback that matters
  • as a funder, selecting start-ups that you feel have earned the extra resources, speed and/or visibility that you can help them to achieve by participate on funding and sharing your knowledge, contacts and expertise to benefit your joint venture
  • as an expert, putting all of your knowledge and skills to play an meaningful role, on making not only our service better, but also helping to build some extraordinary companies of the future

In our world that feels more unified by the day (at least in the online world anyway), there is no question that big changes continue to happen on so many fronts and that there will continue to be from small to extreme global problems that need to be solved. This is the exact reason why entrepreneurs are called to action by so many. Problems of all sizes need solving and industries of many types need serious restructuring.

We want to do our part by building a platform where new start-ups can have a seriously new launch-pad, that they can recognize as their own and you can help us develop it even better.

If you feel that what we are doing is important to you – we invite you to join us, via our service, LinkedIn Groups, FriendFeed and/or Facebook. To follow our progress, be sure to subscribe to our RSS feed and/or follow our Twitter feed.

There is so much that need to be done and so much you can do to help us – to help start-ups, starting right now by sharing your opinions and feedback below :)

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Grow VC announces first advisory board member

Friday, July 17th, 2009
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Silicon Valley investment banker Aron Bohlig joins our venture capital 2.0 team as the first advisory board member

CEO Valto Loikkanen commented on this appointment: “Having Aron on board gives us a strong American perspective and puts our finger on Silicon Valley’s pulse. Silicon Valley is still the world’s leading area for early stage technology companies. Because we focus on helping web and mobile technology startups find early stage funding, Aron’s expertise and local relationships will accelerate our traction in the US market.”

Aron Bohlig brings more than fifteen years of investment banking, equity research and operating experience working with startups and large global growth companies. Aron’s financial services experience includes tenures as a VP at Credit Suisse, as well as roles at Savvian and Investec where he focused on executing over fifty engaged financing and advisory transactions for clients as well as business origination with digital media, traditional media, telecommunications and software accounts. Aron has completed approximately $2 billion USD in advisory transactions and $1 billion USD in financing transactions for growth companies. Aron is located in San Francisco

“Having seen the other models on the market today and knowing what Grow VC is developing, they really are bringing new levels of efficiency to early stage funding,” said advisory board member Aron Bohlig. “The concept is innovative and the team and business model is exciting. Grow VC can accelerate the progress of web and mobile businesses, and provide new opportunities for investors.”

Invitations to join Grow VC’s private beta (and gain a free membership before the pricing package begins in September) are now available. To obtain a special invitation code, contact Grow VC at info@growvc.com.

Four more Advisory Board members will be announced by the end of summer.

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One VC in Italy? No, two.

Friday, July 10th, 2009
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We met with Stefano Bernandi yesterday and had a really interesting chat about the startup scene in Europe. Stefano is founder of excellent blog The Startup and was just invited to become a blogger giving the Italian perspective to TechCrunch Europe, which has previously focused more on the UK and Belgium, and wants to start giving more local perspectives from across Europe. Hope it’s OK we mentioned that, Stefano ;-)

One of the many interesting tidbits Stefano had to share was the surprising fact that Italy has just two serious venture capital firms investing in tech startups. Yes, just two. The country is known for its limiting laws and it has had such an effect on the startup scene that there is virtually only a small tech community (primarily around Rome) and two VCs operating out of Milan.

Stefano’s got his finger on the pulse so if you’re interested in the emerging scene there, he’s your go-to guy. In fact he’s the blogger who broke the story about the launch of DPixel, the second VC firm.

At Grow VC we are dedicated to showcasing a global perspective, and as such, we want to start collecting more ‘go-to’ guys and gals from countries around Europe, Asia and the globe, or states in the US not necessarily ‘known’ for their startup scene (aka not the Valley). If you are a blogger with local perspective, and you don’t mind us syndicating some of your stories, please drop a comment and we’ll start tracking your stuff more closely and we’d be honoured to repost your stuff. As they say, local knowledge is everything.

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Attention SF Grow VC users….

Friday, July 10th, 2009
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We are members of a really useful networking group in the San Francisco / Valley area called “SF New Tech” which uses Facebook as its primary channel. If you’re not a member and you live in this area, get in there. Our advisor Aron Bohling tipped us off to the group, which organises excellent and interesting events for startups, investors and entrepreneurs.

Their latest event is all about the message behind Grow VC! We are so excited to see more events having our same aim and drive! Check out how relevant this is to what Grow VC is all about.

Here is the message from SF New Tech about the event, and how to sign up:

>>>>>>>>

SF New Tech is pleased to announce an awesome new series of events we’re co-producing with our friends at geekSessions that will zoom in on the business end of the technology landscape.

Introducing bizSessions!

Our first event on July 14th will be a spirited discussion about funding models in these current cash starved times.

It’s bizSessions 1.0: VC: FTW or WTF?  …  and it’s all about where money talks –  and bullshit walks.

You’re invited to join the discussion with an all-star panel representing multiple perspectives on this topic — from partners in the largest Silicon Valley VC firms to independent angel investors to entrepreneurs who have taken different paths and lived to tell about it.  We’ll dissect the value of Boot strapping, Angel money, VC funding, micro funds and Ramen noodle profitability… by asking when, why and how you should choose which path to go down?  How are companies, entrepreneurs and investors evolving after the lessons learned in the past decade?   Are social platforms, outsourcing, App stores and new distribution models enabling startups to reach critical mass without major venture capital and changing the funding game as we know it?  And more. Lots more.

Panelists include:

Ping Li  — Partner, Accel Ventures
Jonathan Abrams — Founder, Socializr
Kent Goldman — Principal, First Round Capital
Igor Shoifot — COO, Fotki

Join us for a great discussion and a great networking event!

What: bizSessions 1.0: VC: FTW or WTF?
When: Tuesday, July 14, 2009 from 6:00 PM – 10:00 PM (PT)
Where: Mighty, 119 Utah, SF, CA
Tickets: http://www.facebook.com/l/;http://bit.ly/164CfA

Schedule:
* 6:00 pm – Registration and networking
* 7:00 pm – Speakers and Q&A
* 8:30 pm – Networking & giveaways

A limited number of tickets are now open to the public! Get them while they last.

Click here to register:  http://www.facebook.com/l/;http://bit.ly/164CfA

And here’s the money shot: the first 25 people to use the discount code “sfnewtech-fb-50″ will pay only 1/2 price!  GO!

Cheers!

Myles Weissleder
Founder, SF New Tech
http://www.facebook.com/l/;http://www.sfnewtech.com
415-332-3205

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