Southeast VC

Bring Your VC Questions and Come Friday to Carrboro Creative Coworking

Thanks to Brian Russell, owner/founder of Carrboro Creative Coworking for inviting me to speak to the entrepreneurs at their office this Friday at 10am.

All entrepreneurs in the community are welcome to join and participate.

I will bring the coffee & bagels and will answer any questions you may have about venture capital.

Just to make sure we have enough room to accomodate everyone, please email me - jason AT southcap.com and give me some heads up that you'd like to come.

Triangle StartUp Factory May Give Boost to NC Tech Community

The startup tech community in North Carolina could get a much needed boost soon. Chris Heivly is working on launching Triangle StartUp Factory (TSF), which is based in Durham.

TSF wants to be a startup accelerator for internet and software companies. First time entrepreneurs from all over the country could apply with the very best selected for the three month program. TSF would inject the business with a very modest amount of seed capital (20k), give the new company office space/tech infrastructure, surround the company with active mentors and take an active role in helping the new entrepreneurs raise additional capital. In exchange, TSF gets a small equity stake in each business.

The model is similar in many ways to what TechStars has done, but Chris plans multiple sessions per year and a smaller amount of companies per session.

This is a great idea for NC for a number of reasons. This area has a strong corporate base of tech companies (Cisco, SAS, Lenovo, IBM, Red Hat), top universities (NC State, Duke and UNC) and a very low cost to build a business. Also, TSF could help attract more smart entrepreneurs to move here and also may help retain the talent we have.

Here is a very specific example of retention. During the summer of 2008, I was out in Boulder, stopped by TechStars and met the founders of Foodzie. They moved from Greensboro, NC to Boulder to be part of that program. What if TSF was launched? Would they have considered it? Would a company like that now be based in Research Triangle Park? I also love the idea of playing offense and really going after trying to attract more talent here.

The idea is gaining momentum. Some well-known local entrepreneurs have joined Chris as Advisors/Mentors including Lee Buck and Jud Bowman. Lee is part of another startup accelerator, DC-based LaunchBox.

If you are interested in learning more about TSF and opportunities to get involved, let me know and I will connect you to Chris.

Venture Capital Conferences to Attend in 2010

If you are thinking about raising capital, here is a list of some of the upcoming venture conferences in the Southeast and Mid-Atlantic:

Florida Venture Forum's - 2010 Venture Capital Conference, February 2 & 3, Champions Gate, FL

Southeast Venture Conference - February 24 & 25, Tysons Corner, VA

CED's Venture Conference - April 20-22, Pinehurst, NC

MAVA's Capital Connection '10 - May 19 & 20, Baltimore, MD

Don't feel you have to apply and be selected to formally present your company to make one of more of these work for you. We know a lot of entrepreneurs that have just paid to attend like everyone else (make sure you get the discounted rate for entrepreneurs if this is an option), enjoyed networking and had some productive meetings there too. Sitting in and listening to other companies pitch investors, may give you some ideas of ways to improve your own messaging.

Also, do your homework on who is going to be there. A lot of the conferences post the list of firms that attended in the past. The smart entrepreneurs figure out who from that firm is attending this year and set up a face-to-face meeting in advance. Otherwise, it is just pure luck that you run into that firm at the conference.

This year, we will once again be attending the Southeast Venture Conference and CED's Venture Conference. I hope to see many of you there!

Increasing Company Transparency

I really embrace transparency from our companies. I think most VCs encourage it. But one of our companies took an extra step recently and I thought I'd share it here since it is different, more structured and more importantly the idea originated from the management team, not investors.

But first, I need to provide some background. 

In most of the board meetings we are part of, we hear a lot from the C-level people on the management team. If the company is smaller (say south of 2m in revs), usually the CEO is the one communicating 75%+ of the board package. But as the company grows, fills out and has more of a team, the COO, CFO are included and they share in providing an update and are active in the discussion.

What sometimes gets left out of these meetings is hearing from people like the VP/Dir of Sales or VP of Engineering. Part of this is based on time. You can't hear from everyone in the company at every meeting.

So, what ends up happening is guys like me who want to engage and build a relationship with them, have to find other ways to do that - schedule separate meetings (lunch, coffee, chat in the halls, drinks after work, etc.). I think as an investor, it is good to meet with lots of different people at a company - at all different levels within the organization - even down to the most junior people. I think that is how we can really take the pulse of a company and sometimes some of the best strategy ideas can come from meetings like that. I find these meetings enjoyable and the employees like hearing the enthusiasm of an investor.

Okay, now to what one of our companies is doing.

The CEO sent out the regular board schedule for the year. It includes the 7 face-to-face board meetings for 2010. But this year, he added 7 scheduled calls linking each investor with an exec on the team. So, I now have separate calls scheduled with the CTO, VP of Sales, VP of Bus Dev and Chief Revenue Officer. And how it works is it rotates to the next person each time. Sure, I talk with these guys regularly anyway, but the scheduled call makes it happen not only for me, but all the other VCs as well. And at the same time, 4 VC firms are updated on the company's activities and each exec is given more of a connection to investors over the course of a year. The calls will be much more informal than a board meeting and probably include a deeper dive into that person's group.

I really like this approach. I'm glad the CEO and team there were proactive to do something like this. Some of the boards we see are more active than others. I think actions like this will help create a more informed/engaged board, which I think will make this company even stronger for years to come.

VC Predictions 2010

I asked a few VCs I know to make a prediction or two for 2010. I did something like this in past years too. Thanks to Tim, Jeff and Matt for spending the time on this.

Happy New Year!

"Global venture capital investing will double from 2009 levels. Optimism, innovation around the world will  continue to improve. Frugality lessons will be learned and technology businesses will become more profitable and grow significantly to improve lives. Jobless rates will stabilize as entrepreneurs start hiring again. And finally, 2010 will be he vintage year for at least 30 Fortune 500 companies that last for 60 years or more." - Tim Draper, Draper Fischer Jurvetson

 

"I think the VC business will continue to shrink, with $15 billion deployed by 500 active firms and heading towards 5,000 professionals.

That said, the equity market rebound will reesult in an IPO rebound. I predict we'll see 30-40 IPOs, up from 10-15 in 2009."- Jeff Bussgang, Flybridge Capital Partners

 

"I predict 2010 will be the beginning of the next 'bubble.' I won't venture to guess publicly what the bubble will be about, but it will start. It will build upon something that is already underway and has what otherwise looks like a promising future. Hearing of the idea, others will want in and eventually too many will join the party. The opportunity will grow and late comers will think they are getting in early when in fact the space is already well overcrowded. Those who were in early and are discliplined, will get out, but they will be the tiny  minority. The opportunity will be over-funded and over-exploited and it will lead to another lage 'burst' and contraction.

In our ever shrinking world, doing things to excess has become human nature." - Matt Fates, Ascent Venture Partners

Richard Davis' Talk to North Carolina SaaS Companies

We had Richard Davis, an equity analyst from Needham & Co speak this morning at a SCV Entrepreneurs Breakfast. Given Richard's background, this one was for SaaS companies here in North Carolina. The room was packed. NC has a strong group of SaaS companies and we have been getting them all together on a fairly regular basis for a while. Like today, it usually revolves around an interesting speaker and we always have a lot of time before and after for general networking, questions, etc.

Here are some interesting things that came out of today's talk, stealing some of the content from Richard's deck:

• From 2000 to Q1 09, $70 billion has been invested by VCs into 5,000 new software companies
• Since 2003, there have been 1,300 exits. There are a lot of companies still out there
• At 7 years, the average age of a company in a VC portfolio is older now than any time since 1977
• The hurdle to get funded continues to rise. You need to be "awesome" to get funding.
• He talked about requirements to go public, named specific companies that have a shot - and why they are in that position to be able to
• Some tips -- for companies between 0 and 5m in revs, he mentioned that they should try and keep burn real low and when you raise money, try not to sell more than 25-30% of the business. He also added to try and not raise more more money than your revenue.

If you'd like a copy of the deck, which comes along with all their typical legal disclosures, email me - jason AT southcap.com. Also, if you are a local SaaS company and want to be invited to the next breakfast, let me know that too. We keep them very informal and try to pack them with as much useful information as we can. 

A special thanks to SCV portfolio company, ChannelAdvisor for hosting this morning. CA is one of the larger SaaS companies in our region so this was the perfect place to have it.

SCV Talent Fuse

We have met a lot of experienced technology talent here in North Carolina lately that are on the sidelines. Some are leaders. Some are developers. What they have in common is that they are all thinking about what they want to do next. Of course, we want to be supportive. A few weeks ago David and I were talking and recognized the chances of them connecting with each other at a conference would just be luck.

So today we hosted a small version of that group at our office for two and a half hours. It included former execs and developers from companies like Red Hat, Google, Yahoo, Blackboard and a few others. I appreciate all of them making the time. The goal was for that group to meet, exchange ideas and with my fingers crossed, maybe a new company will emerge from it? Who knows. Its worth trying.

We kept the format very informal. We started by going around the room and everyone spent a couple of minutes talking about their background and what they did in 2009. A few talked about projects they are working on with some of those having gained some nice traction so far. They talked about interesting business and technology trends that they see. They also talked about what they need to start a new company. Of course, capital was talked about, but it is clear that a lot of them were also looking for a business partner. In the end, we made sure everyone on the list was connected with contact information.

The feedback that we received so far has been positive. I think we had a nice mix of people in the room. A couple people knew each other already, but for most, it was building new relationships. I know a few of the people in the room are planning to follow up and get together on their own tomorrow. That's great! We'll see what happens. And, I think we will do another one of these again soon.

Include Sales in Your Strategy

We hear it a lot. Entrepreneurs tell us how their software is better than all their competitors. Sounds good enough right? Not for them. They are so driven by having the very best technology that they get obsessed and continue to add more and more features.

Meanwhile, their company is stuck with zero sales and when we ask about their sales strategy, they sometimes give blank stares back. Why? Because they haven't thought about it yet. Or they are scared to pick up the phone to start dialing for dollars. Usually, excuses start flowing.

A very passionate entrepreneur I spoke with the other day who is also at this stage said to me that he only wants his company to be order takers, not sales guys. One of my partners says order takers only exist at McDonalds.

We're trying to do our part to help when we see promise. We often work to connect great tech and business people together. In the example above, I offered to even help him find and interview sales candidates.

We really push the entrepreneurs we speak with to connect with their potential buyers early on. Get a strong dialogue going with a bunch of them. Ask them for their ideas and help. Where does it help your prospect most? What features does it lack? Can you build a relationship with them and get them to commit to using it when you are ready? Will they buy it? How much? Ask for feedback. I recommend picking some local potential customers too, since it is easy and cheap to just drive over and meet with them face-to-face. Introductions to those individuals can sometimes be easier too.

Internet Summit Attracts Over 1,200 People to Raleigh

The second annual Internet Summit was last week in Raleigh and co-presented by TechJournal South and Southern Capitol Ventures. You can see all the details, speakers, sponsors here. Over 1,200 people attended, which was almost double last year's event.

The conference exceeded all my expectations and as a firm, we were proud to be involved. When I sat down with Eric Gregg and Scott Hedrick at TechJournal South a year and a half ago and we came up with this idea, I never thought it would get this big, this fast.

The goal of the conference was to put on a more national internet focused conference here in our own backyard. I think this area has needed something like this for a while. What I really like about it is the ability to tie in so many leading national brands and still have the ability to show off the very best regional ones too. For example, locally iContact sponsored. So did Cary, NC-based Bandwidth.com - the guys that power Google Voice. Research Triangle Park has a lot of depth. Sometimes we need to show it off a little. :)

Also, I love all the new business connections that conferences like this help with.

I also liked how we had a great networking reception the night before, had a packed agenda, but still was able to keep the price of the conference at $295 or $245 if you used one of the codes circulating around. I think that helps make it very affordable.

For those that attended, I'd love to get your feedback. I've read a lot of it following #isum09 on Twitter. You can also leave a comment below or just email me - jason [AT] southcap.com. Also, I know a bunch of you have been asking when the taped sessions will be available online and I heard that it could be in about a week and all conference attendees will be sent an email.

For more info about Internet Summit 09, read the TechJournal South story or read this, this, or this.

Thanks to everyone that attended, sponsored, flew in to attend or speak (very very important) and a special thanks to my partner David Jones for all his help and connections. And of course, thanks to Eric, Scott and the team at TechJournal South. Their hustle and passion for making a difference here in the region is noticed and very much appreciated.

Why Showing Up to a Meeting is Not Enough

Over the last few weeks, I have been giving greater thought to how people perceive our firm after a first meeting. And this is happening because during that same timeframe, I've had two very different experiences with companies I have met with. And that made me think more about my personal interactions with people that meet me or my partners. I thought I'd share my experiences here from those 2 meetings hoping you and I can learn something from this as well.

To set this up properly, it is important to mention that:

1. Our firm could be a customer for both companies I talk about.

2. Both execs I spoke with are very influential in their organizations.

3. They both operate in a very competitive business (not against each other).

4. What they sell is not important.

5. I received a very warm intro to each person.

Here is a brief description of how each meeting went along with my reaction to each:

Meeting #1

What happened: I met him at his office. He personally came up, made me feel welcome and like he was really excited I was there. Warm smiles, great handshake. He seemed very polished, interested in our firm and in return, I was sincerely interested in what he is doing too. I promised him a 30 minute meeting. The meeting did not seem rushed, but was focused. He didn't stare at his watch or work on his blackberry. I ended the meeting after 30 minutes. He followed up afterwards with a very positive note and some other things to be helpful.

My reaction: I felt good about him and his company while walking out his door. I know I will refer them business. He seemed very genuine, has a strong reputation in the makret and I know if I referred someone there, I am completely confident, they would be in great hands. If he asked me for help going forward, I would do it.

Meeting #2

What happened: Again, I promised this individual 30 minutes. (Btw, I like 30 minute meetings sometimes because they get everyone very focused.) All during the call he seemed rushed and really not caring about most of what I had to say. He jumped to conclusions on some topics without letting me finish and before really understanding it. I could hear him typing. He wasn't engaged. In fact, I felt like he couldn't wait to hang up the phone with me. The call (with my suggestion) ended quickly. I left the call thinking this guy was a prick.

My reaction: Not sure how he will treat people I refer to him. Will they be treated similarly?

Final conclusions:

Okay, I am not leaving this post just bashing some guy I spoke with. Instead, I want to relate this directly to me and our firm. At SCV, we take a lot of calls and meetings. We are constantly meeting new people and we love that. It is our choice to acccept these meetings, put them in our calendars and show up! But just showing up as "Meeting #2" did above, is not good enough. Our reputation continues to be built on passion. We hope people that meet us, see and recognize our passion and excitement for being in the VC business. We want to leave a favorable impression and hope more people want to work with us or at least want to get to know us better. We can never have enough friends. Never.

Of course, as you read this, I hope you realize that your time is also important. If you decide that a meeting is important enough to schedule, put some effort into it and get something out of the conversation. You committed to the meeting already and are investing your time. Will the 30 minutes be positive or negative for you and for your guest? It is your choice. How you act in could stick around for a long time. And people talk. If you don't want to be there, be respectful and cancel the meeting saving the person you are meeting the time/energy.