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Posts Tagged ‘Angel Investor’

Simple blogging startup Posterous raises $4.4M

Posterous, a company that wants to make it super-easy for anyone to publish their own blog, has raised $4.4 million in its first round of institutional funding.

The San Francisco company’s big selling point is its simplicity — just send an email with the title, text, and media that you want to post to post@posterous.com, and Posterous handles everything else. If it’s your first time using the site, Posterous even creates your blog for you. Its closest competitor is Tumblr, but Posterous has found an audience of its own, and told TechCrunch it now has 12 million unique monthly visitors.

The funding was led by Redpoint Ventures, where Posterous already had a connection, since Redpoint partner Satish Dharmaraj already backed the company as an angel investor. Trinity Ventures, SV Angel, Founder Collective, Lowercase Capital, Brian Pokorny, Aydin Senkut, and XG Ventures also participated in the funding. (Senkut is also an investor in VentureBeat.)

Posterous has now raised about $5.1 million in funding. It was incubated by Y Combinator, and in fact Y Combinator runs a blog on Posterous.

Companies: Posterous, Redpoint Ventures, Trinity Ventures

People: Satish Dharmaraj

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Can Entrepreneurs Be Made?

Silicon Valley investors often have a picture in their heads of the type of person who is worthy of funding: young, brash, stubborn, and arrogant. They believe that successful entrepreneurs come from entrepreneurial families and that they start their entrepreneurial journey by selling lemonade while in grade school. Angel investor and entrepreneur, Jason Calacanis said as much in his recent talk to Penn State students. And after meeting Wharton students, VC Fred Wilson expressed shock when a professor told him that you could teach people to be entrepreneurs. Wilson wrote, “I’ve been working with entrepreneurs for almost 25 years now and it is ingrained in my mind that someone is either born an entrepreneur or is not.”

Jason, Fred, and Silicon Valley VCs, I’ve got news for you: you’ve got it all wrong. Entrepreneurs aren’t born, they’re made. And they aren’t anything like you think they are. My team surveyed 549 successful entrepreneurs. We found that the majority didn’t have entrepreneurial parents. They didn’t even have entrepreneurial aspirations while going to school. They simply got tired of working for others, had a great idea they wanted to commercialize, or woke up one day with an urgent desire to build wealth before they retired. So they took the big leap.

We found that 52% of the successful entrepreneurs were the first in their immediate families to start a business — just like Bill Gates, Jeff Bezos, Larry Page, Sergei Brin, and Russell Simons (Def Jam founder). Their parents were academics, lawyers, factory workers, priests, bureaucrats, etc. About 39% had an entrepreneurial father, and 7% had an entrepreneurial mother. (Some had both.)

Only a quarter caught the entrepreneurial bug when in college. Half didn’t even think about entrepreneurship, and they had little interest in it when in school.

There was no significant difference between the success factors or hurdles faced by entrepreneurs who were extremely interested in entrepreneurship in school (and who likely set up the lemonade stands) and the ones who lacked interest. But entrepreneurs with extreme interest started more companies and did it sooner. Of the 24.5% who indicated that they were “extremely interested” in becoming entrepreneurs during college, 47.1% went on to start more than two companies (as compared with 32.9% of the overall sample). Sixty-nine percent started their companies within 10 years of working for someone else (as compared to 46.8% of the rest of the sample population).

What did affect their successes?  Education — but not the college they graduate from. In a different study of the 652 CEOs and CTOs of 502 tech companies, we researched the correlation between education and the sales and headcount of companies founded. We learned that the there was a significant difference between companies started by founders with just high-school diplomas and the rest. Education provided a huge advantage. But there wasn’t a big difference between firms founded by Ivy-league graduates and the graduates of other universities.

The education and training of entrepreneurs is something that the Kauffman Foundation has been researching extensively. Over the last six years, it has invested around $50 million on academic research to understand what makes entrepreneurs tick and what policies are most conducive to entrepreneurship and to construct data bases to permit analyses of these subjects. (Kauffman has also funded some of my research at Duke, UC-Berkeley, and Harvard.) Its VP of Research, Bob Litan, says that Kauffman has learnt conclusively that entrepreneurship can be taught. The key is to provide education at “teachable moments” — when the entrepreneur is thinking about starting a venture or ready to scale it. What entrepreneurs need isn’t the type of abstract course they teach in business schools, but practical, relevant knowledge.  That’s why Kauffman created a program called Fast Trac, which has trained 300,000 entrepreneurs so far.

One of the findings of Kauffman research is that of the appx. 600,000 businesses that are started every year, less than a fraction of 1% become high-growth “scale” businesses. These new firms, especially the “scale” firms, have added all of the net incremental jobs to U.S. economy since 1980 (about 40 million), and probably account for about 1/3 of GDP growth since then. So the key to boosting economic growth is to increase the number of successful high-growth startups.  After all, the growth rate of our economy is nothing more than the aggregation of the growth of our firms.

That is why Kauffman (which has a $2 billion endowment) is investing heavily in an ambitious new program called Kauffman Labs.  This aims to dramatically increase the ability of small businesses to become big businesses. The Labs program is built around a novel idea: that highly motivated individuals with “scalable ideas” can be recruited to be entrepreneurs and to be made successful, by surrounding them with a network of other experienced entrepreneurs; sources of money; and mentors. The goal is to educate entrepreneurs and surround them with a powerful network. This is like a Y Combinator on steroids.

Anecdotal evidence also shows that there are many more factors at play than that of genes. Note this BusinessWeek article about waves of spinoffs from Google. I doubt that all of these Google employees who are starting successful businesses were born with entrepreneurial genes. VC and former entrepreneur Brad Feld also blogged about how many of his frat buddies at MIT had become successful entrepreneurs. Were all of these people born to be entrepreneurs as well? I don’t think so. It is probably education, exposure to entrepreneurship, and networks that led these people to pursue the entrepreneurial path — which means that Kauffman Foundation may have hit on the right idea with Kauffman Labs.

The reason this topic is really important is that, as Wilson writes, “Venture Capital is a lot about pattern recognition”. The reality is that VCs like him make quick judgments about people based on the stereotypes in their minds. So, like the women that I wrote about in my previous posts, we may be disadvantaging another important segment of our population – a segment that is older, more humble, more sensible, and more realistic than the population that is getting all the attention (and the money).

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa.

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EC update: Money, money, money – it’s a VC world

Here’s the latest from VentureBeat’s Entrepreneur Corner.

Ask the attorney: What sort of stock should I give my angel investor? – Getting pressure to sell your angel investor preferred stock? Attorney Scott Edward Walker runs down some alternatives and the advantages and disadvantages of each.

Five compensation-related mistakes startups make (and should avoid) – Are you deferring your salary until your start up starts to take off? Bad idea, says corporate and securities attorney Caine Moss. He explains why here – and details four other common mistake.

The lost generation of entrepreneurs – The Internet bubble had plenty of problems, but the flood of start ups also gave some of today’s best entrepreneurs a chance to get leadership experience early. Jeff Bussgang, general partner at Flybridge Capital Partners, notes that the lack of substantial start-ups between 2001-2009 has created a deficit of strong entrepreneurial leaders.

Our secret to getting funded – Infusionsoft went the bootstrapping method through the early days of its business, but ultimately secured $17 million in two rounds of venture capital. Co-founder and CEO Clate Mask describes what the company did to secure that money.

A VC’s tips on securing seed and series A financing – Purse-strings are  finally loosening at venture capital firms – if you meet the criteria. Opus Capital general partner Carl Showalter tells you the questions you’ll face – and the criteria you’ll be evaluated upon.

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AppsFire Draws In Some French Angels To Bankroll Mobile App Recommendations

With more than 140,000 apps on the iPhone alone, there is a real need for services which help you find the best apps. Apple’s iTunes ratings and genius recommendations only go so far. One startup attacking this problem is French-Israeli AppsFire, which just raised its first angel round. AppsFire was co-founded by former TechCrunch France editor Ouriel Ohayon and Yann Lechelle.

The investors are a group of successful French entrepreneurs (yes, they exist), including Marc Simoncini (CEO of dating site meetic.com), Jacques-Antoine Granjon (CEO of Vente-Privee.com), Xavier Niel (CEO of French ISP Free), and entrepreneur and angel investor Jean-David Blanc (who also recently invested in Square). The amount raised wasn’t disclosed but it is believed to be in the low seven figures.

AppsFire offers a simple utility app which makes it easy to share iPhone app recommendations with your friends. Since its beta launch last summer, more than 10 million apps have been shared, leading to hundreds of thousands of clicks to iTunes. It also highlights apps through its AppStar Awards. Recently, AppsFire started promoting its own short link for iPhone apps, http://getap.ps/, which opens up iTunes on both the iPhone and desktop computers to a specific app’s page. While you are waiting for iTunes to open up, information about the App appears on the landing page, developers who use getap.ps will get analytics on conversions and other stats. This America Life (http://getap.ps/thisamericanlife) and DailyMotion (http://getap.ps/dailymotion) are already using it.

The startup plans to move beyond the iPhone to other mobile devices with growing app markets such as Android and Blackberry. It also recently launched PasteFire, a way to share other things such as Web links, emails, phone numbers, and photos to and from your iPhone. It will start to give users app recommendations based on the content they copy in PasteFire as well. The whole focus of the company is to help people discover new apps and drive more downloads and sales of apps. Competitors include Appolicious, 16Apps, and others.

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EC Roundup: Your legal questions answered –- and more startup therapy

Here’s the latest from VentureBeat’s Entrepreneur Corner:

Ask the attorney: Founder vesting — Attorney Scott Walker kicks off this regular Entrepreneur Corner series, answering the burning legal questions of startup owners. This week: Should you split company stock equally among founding partners? And what sort of vesting options should you enable?

Beware the hockey stick in your budget — Your 2010 budget is probably set, but have you made some critical assumptions of error? Brad Feld, an early stage investor and co-founder of Foundry Group, looks at the four most common types of budget models and the problems with each.

Outsourcing entrepreneurs: How the EU lets startups slip through its fingers — While America is flush with accelerator programs, there’s a paucity of them in Europe. The Difference Engine CEO Jon Bradford argues that this means the best and brightest start-up owners overseas are flocking to the U.S., which could leave the continent in a bind in the years to come.

The startup chronicles: It pays to be bull-headed — Determination can be one of the most important characteristics for entrepreneurs, says author and startup founder Bruce Judson. When people tell you something is impossible, but it’s critical to your company, a little stubbornness is often the only way to succeed.

Startup therapy: More questions to force you to face reality — Angel investor Jason Cohen offers up four more questions to ask yourself in order to figure out what you need to do today to increase your startup’s growth and profits.

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Startup therapy: More questions to force you to face reality

(Editor’s note: Jason Cohen is an angel investor and the founder of Smart Bear Software. This story originally appeared on his blog.)

Welcome back. Make yourself comfortable on the couch…

Last week, you’ll recall, we looked at ways to help you discover what was true for you and your business – as well as what you need to do now to seek profits and growth. We’ll continue that line of questioning today – and we promise not to ask a single question about your relationship with your mother.

If you were forced to hire someone today, how would you define her job such that she would contribute enough revenue to cover her expense?
I know, you can’t afford anyone right now, no one can do as good a job as you, and you don’t even know that you’ll ever hire someone. That’s OK, that’s not the point of this question. This gets you to ferret out what tasks are being dropped by the wayside because you’ve got higher-value things to work on, because you’re having to fight fires – or maybe because you’ve got your priorities wrong.

If you honestly can’t imagine that there’s anything a full-time person could do that would generate enough revenue to cover their salary, that’s not a bad thing.

But often this churns up one or two very-part-time tasks which really ought to be done but aren’t. No need for a new employee of course, but maybe you should re-prioritize those tasks next month.

Sometimes you come up with a good answer, which means you should contemplate help. “Help” doesn’t necessarily mean a proper, 40 hours/week (OK, who are we kidding, 60 hours/week) employee. It could be a part-time consultant. It could be an intern.  It could be an outsourced office assistant. It could be a new partner willing to work for stock.

Which of your business operations do you hate?
Do you like creating new features but hate tech support? Enjoy product demos but hate cold-calls? Need to have your arms around company finances but hate bookkeeping? Love writing ads but hate dealing with ad sales agents? Get excited about your field of expertise but hate writing blog posts and Twittering?

Part of why you’re in business for yourself is creating something from scratch and delighting customers, but the fact is that most business operations just suck. You can’t justify avoiding important tasks because they’re not fun. I know — I’m the worst procrastinator when it comes to those things!

It’s useful to identify these undesirable-but-necessary tasks because you can do something about it:

If you shut off email, Twitter, chat and the phone – and just buckle down – you might be able to get through some of these tasks in less than 15 minutes. Bookkeeping is like that. Get it off your plate; you’ll feel better.

Mundane tasks might be outsourceable. I’ve found that “virtual assistance” services are surprisingly affordable if you have a lot of little time-consuming tasks.

See if your existing vendors are willing to do some of your tasks for a small fee. For example, accountants often provide bookkeeping services at a lower hourly rate.

Consider an intern or consultant. Before you argue that the cost is too great, factor in the lost revenue you accrue while working on those tasks.

Can you share the burden with your co-founder or employees? Maybe they don’t hate it as much as you do. You can trade (or switch off) hated activities.

If you’re still stuck on not wanting to spend any money to save time, remember what Dharmesh Shah says: Act as if someone is paying you $1,000/hour for any activities that improve sales (making, selling and your customer’s happiness), and for everything else they’re paying you $10/hour. It’s accurate.  (Before you argue, don’t forget about the cost of lost sales.)

What initiatives could be done half-assed without significant impact?
I know: This is a shitty question. If you’re like me, you are that aggravating combination of perfectionist and control-freak that, on the one hand, leads to stellar work  – but, on the other hand, means some things take too long. Some parts of your business are core to your success: Which features you implement, how you present yourself and interact with customers, discovering how and why people give you money.

But the fact is your to-do list is infinitely long and you have to pick your battles. Your “Contact Me” page has to exist but it doesn’t matter what it looks like. Every blog post doesn’t have to be a work of art. Your Google Ads need variety (for testing), not hours of wordsmithing. It’s better to have an eBook about anything than to have no eBook at all.

If it can be done half-assed, and it’s not going to impact revenue, maybe it should be half-assed. Allow yourself to delegate (because it’s OK if it’s not done exactly how you would do it). Push more out the door.

If you could get one solid hour of advice from a guru you respect, what would you discuss and what would be the goal of the meeting?
This is a fun way of asking: “What knowledge/feedback/direction is critical to your business right now, and which you’re uncertain about, and which you feel other people are expert in?”

Phrasing the question this way also leads to solutions. For example, maybe you should set aside four hours to get your hands on that guru’s materials (blog, book, podcasts) and immerse yourself not just in advice but in their mindset. Or email them and see if you can get some advice! Or find other people that guru respects and who might be more accessible.

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EC Roundup: A look at what’s to come in 2010

Here’s the latest from VentureBeat’s Entrepreneur Corner:

Venture Capital 2010: Hot (and cold) sectors to watch – Grotech Ventures Steve Fredrick and Don Rainey general partners give their take on the VC outlook for this year – as well as their predictions on the areas that are likely to show the most significant growth (and consolidation).

Eight trends to look for in 2010 – This year may not be as tumultuous as 2009, but it could still hold its share of surprises. Dave Kellogg, CEO of Mark Logic, looks at what 2010 holds for social networks, cloud computing and Google, among others.

Should you sell your business in 2010? – While selling a company is never easy, doing so in 2010 should be slightly easier than it was in 2009, says John Ovrom. The founder and CEO of Exit and Answers gives his thoughts on M&A activity, the financing situation and why the franchise business could be red hot.

The start-up chronicles: Reflecting on reflecting – It’s easy to feel productive when you’re working hard – but spending a lot of time on a project doesn’t mean it’s beneficial to your business. Bruce Judson looks at the importance to stopping to evaluate what you’re doing and learning the discipline of strategic thinking.

Startup therapy: Six questions to ask yourself regularly – You read plenty of stories telling you what to do – but how do you identify what you need to do now to grow your business? Angel investor Jason Cohen puts you on the couch to give you six questions you should be asking yourself.

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Startup therapy: Six questions to ask yourself regularly

(Editor’s note: Jason Cohen is an angel investor and the founder of Smart Bear Software. This story originally appeared on his blog.)

Therapists don’t tell you what to do. Rather, they ask probing questions that get you to discover for yourself what is true for you, your situation, and what you want.

You’re smart. You’ll make good decisions. But you also get bogged down in daily minutiae and putting out fires, meanwhile missing the big picture. That’s where this piece comes in: To splash cold water on your face, forcing you to face reality and continue to defend or change the important choices inside your business.

What follows is your startup therapy session. Having to think through and answer these questions forces you to identify what you need to do today to seek profits and growth.

In one sentence, what does your product do and who buys it? And in one sentence, why does someone buy your product?
These are surprisingly difficult questions. The shorter and more precise your answers, the more you understand why you exist. If the answer is:  ”I honestly don’t really know why people give us money,” that’s something to remedy immediately.

If you have an answer, is it because you have hard evidence that this is how your customers perceive you and why they give you money, or just because you believe it? “Evidence” means emails and Tweets and testimonials that use those words exactly; otherwise you’re likely interpreting their feedback to match your expectations. (I find myself constantly guilty of this disconnect.) If you don’t have evidence, it is OK to have a hypothesis but you should be concerned about collecting proof and disproof.

If you do know the answer, these two sentences should drive your marketing efforts. If these sentences aren’t on your home page, why the hell aren’t they? Is there anything else more compelling to potential customers? At the least, these represent the themes that drive your marketing campaigns.

What one thing is most responsible for preventing sales?

Do people not know you exist? Is it pricing? Not enough product features? Unorganized sales strategy? The look-and-feel of website? Something else?

Most little companies aren’t honest about this, yet it’s possibly the most important question you could ask. For example, I’m an engineer, so my first answer to “Why don’t you have more customers?” is almost always:  ”Because we need this feature.” You hear some potential customer say, “we will buy if you do XYZ” so you conclude that if you implemented XYZ people would start breaking your door down.

But is that really the case? If you added one feature and maybe satisfied that one customer (assuming they wouldn’t ask for a second thing – which, in my experience, they usually do), would that get you 100 more sales? For those hundreds of people who downloaded your software, but never bought — is the reason “not enough features?”

For the hundreds of thousands of people who never came to your website in the first place, or hit the front page and left after three seconds, is the solution “more features?”

When you honestly ask yourself this question, it will naturally lead into things you can do right away to get more people to the site, into a trial and/or into a sale. Don’t just rest on what comes easiest.

What’s one thing you could do to get more feedback from customers, potential customers or sales you’ve lost?
You already know that external feedback is the only way to empirically determine how to build products people want to buy. Maybe you can’t drop everything to solicit feedback (although folks like Eric Ries say you should), but surely it’s worth one day every month to go out of your way to collection information from the field.

To get the ideas flowing, here are eleven ways to get more feedback, most of which take less than a day to implement.

If you had zero revenue from now on, on what date would you run out of money?

The first thing this does is force you to nail down your monthly expenses and accounts payable. Second, you know the length of your fuse even in event of disaster (if you have revenue) or if you never manage to land a customer (if you’re just starting out).

More than that, knowing your “padding” as I used to call it is helpful in making decisions like “Can I afford to try this Risky Expensive Thing,” such as making your first hire or trying a $20,000 media blitz. Whenever you’re contemplating a new expensive idea that could be awesome but could be setting money on fire, your fuse date helps you know how much time you’re risking — time to recover if your bet doesn’t pay off.

Finally, knowing “the day my business could die” helps focus your attention on activities that bring in revenue.

If someone handed you $100,000 today, how would you spend it to maximize future profits?
This gets you to crystallize what cost-centric activities would most help your business. We get caught up in free-but-takes-tons-of-time marketing and development activities — and most of the time that’s a good way to think — but sometimes it’s still true that “you have to spend money to make money.”

Sometimes the “thing you could do” is so compelling, it might mean you should raise a small angel round or consider debt. Typically it’s best to get by with minimal debt and investment, but if the “thing you could do” is transformative, you might reconsider.

Think about these. We’ll do a follow-up session next Friday…

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