Failed expectations

Investors will put money to work in areas and fields they understand. The term venture capital has been criticized because entrepreneurs have felt that VC investors don't really take risks.

Afterall the entrepreneur has chosen to put her livelihood on the line, shouldn't the investor take some risk as well?

It becomes a game of relative expectations. An investor can put money into a tbill or stock, and can then sell the instrument if things go wrong. That is not the case with a private company. The secondary market for illiquid shares is essentially nonexistent.

Any investor who is interested in the company will put money directly into the business. That way the cash will be used to grow the investment and not bail someone out. So the investment is locked up with the business, not the entrepreneur.

And if the business goes belly up, the money is lost.

The investor is taking a risk just by entering into a private company investment. All the money is at risk and there is rarely any salvage value. It is possible, but unlikely to happen.

The more both sides understand about the other, the fewer failed expectations should exist.

Simply put. VC is going to be hard in 2010

It is already hard in 2009.

Few funds are closing today at the level initially projected. I'm seeing junior level people being let go. No one is looking for associates today, too many fomer partner level people are available.

A failed partner has contacts, and experience that can be useful. The ones who were entrepreneurs before have the best chance of successfully starting another business. The ones who recieved their education and training via the financial analysis will have a harder time. The financial markets and industry are not the same today.

An investor who can't cut a check is pretty useless. Someone who is afraid for their jobs might be more conservative. Money is tight, and an investor feels no pressure to rush.

None of this bodes well for the entrepreneur.

And truth be told, many investors who are afraid today will not be around after the culling. The ones who succeed during this time will become the giants of tomorrow. However only time will tell if any actually succeeds instead of just survives.

Both sides unhappy.

On the today show this morning, madoff's lawyer said that a good result in plea bargaining was when both sides were unhappy.

In business of both sides are unhappy with a deal, it doesn't get done. Quite simply we should not be able to force someone to do a transaction they don't want.

It doesn't mean that you can go ahead and ignore things you don't like. It simply means that the legal approach and business approach are very far apart.

Green companies that aren't

Minyanville has 10 companies that aren't really green.

 

http://www.minyanville.com/articles/BP-GE-DAL-SHLD-tm-RDSB/index/a/23235

 

Greenwashing has been around for a while. Sometimes these companies are using the "green" activities, not for the benefit of being green, but more as a distraction against some of the other unpleasant activities they do.

 

When it's easy enough to do it right, I keep wondering why these folks bother with the green-wash?

Get more sleep, it's good for the memory

MIT article on how memory creation is aided by sleep.

http://web.mit.edu/newsoffice/2009/memories-0624.html

 

Most entrepreneurs in the US don't get enough sleep.  This might be possible in the short run, but in the long run it is detrimental.

 

Akin to saying "I don't have time to sharpen the blade, I need to cut through this now!"  both ways can get you to your goal.  But with sleep, you will get there faster.  And healthier.

 

I've written about the memory affects of sleep, the benefits to blood pressure, weight loss, mood, and now it appears, mental health. 

There's also the challenge of the micro-sleep that will occur in meetings, or when behind the wheel of a car.

 

short form: get some sleep. 

 

Few folks who bother to read this blog will actually be getting all they need.

You lose credibility when...

You will lose credibility in a company pitch when you do the following:

Claim that there is no competition.
Use percentage math to justify the investment.
Have misspelled words in your documents.
Are not aware of the local environment.
Ask for too much.
Ask for too little.
Are unaware of the entire process of building a team or company.
Look at the next milestone as the finish line.

Grubstake breakfast event

It was well attended this morning. Saw hememics again, they were a participating company at last Tuesday's talk to the angels event.

This along with yesterday's breakfast with experts, showed the need that exists in the neighborhood.

Some of the investors mentioned that money is tight. Both the angel and VC investors are putting tougher terms and have tighter wallets.

Getting to cashflow neutral is important. You need to show how you are going to get there. Have defensible projections. When asked "who else has done those numbers?". Have a good example. Otherwise the numbers are just fiction.

At navy opportunity forum

These events may not initially look to be lined with my day job, but each ship out there on the ocean is a self contained city.

For distributed energy, desalination and many other systems the navy has access to very interesting technology. I've been going to dawnbreaker events for a while now. Attendence seems to depend on the economy and how much the government is targetted as a customer.

Not all SBIRs are the same

Each one has its own quirks and approaches. Rewrite each grant proposal anew.

You will get in trouble when you simply reuse an application. It rarely works well. Each program officer or project manager knows the individual characteristics of his own program.

Remember, each organization has their own flavor of crazy.

No monopoly on bad power point presentations.

Early stage companies do not have a monopoly on bad powerpoint skills. Todays navy forum has had its share of bad slides, awful use of laser pointers and horrible presentation flow.

It seems that there is no end of oppotrunities for improvement. In any given presentation, a few nodding heads (not mine this time) and a lot of distracted audience members

It does take time to make a good powerpoint presentation. But the purpose of the presentation is communication. If you fail the primary mission at the start, then why are you on stage?

Investors' circle coming to DC.

In November, IC will be holding their fall event in DC not Boston. This means I will play host and not have to fly out fir the confrence.

In preparing for the event, Wayne Silby hosted the local IC members last night. As stories were swapped over wine and great Thai food, you could see the enthusiasm in all the participants grow.

A couple of investment tales were told, things that went right, more that went wrong. But everyone there knew what was going on in the neighborhood.

As the night winded down, people promised to stay in touch, as well as help prepare for the November event.

Fewer crazy ideas.

It might be that word has gotten out. There are fewer crazy ideas hitting my desk. Still a lot of deals that I can not invest in. But the viability of these ideas is much stronger. How can I tell? These companies have customers and transactions today. They are selling.

As long as customers keep buying from you and you can make a good profit. You'll be in business. Once that stops then you're in trouble.

Ideas that flame out quickly are fads. Being in a sustainable long term business means meeting a need, not a want.

Metal that draws water uphill

Nanotechnology to move water around

 

The use of a femtosecond laser to change the surface properties of metal, and thereby how it interacts with other materials.

 

So we are now able to change the color of metal (change which wavelengths of light it reflects)

change the brightness of an incandescent filament (this could be a better solution than compact florescents)

and move water uphill (the beginnings of a perpetual motion machine)

 

All crazy talk at one point in time.

 

hopefully all common place in the near future.