Tuesday, September 9, 2008
The LaunchBox Experience - Founder Perspective
Ahson Wardak, founder and CEO of ShareMeme, blogs about his experience in LaunchBox08. Click here to see what Ahson has to say about the value of participating in LaunchBox08 in terms of "advice, connections and money".
Friday, August 15, 2008
Insights for Entrepreneurs from LaunchBox08
I am often asked for advice from entrepreneurs with respect to their businesses and raising angel or VC funding. Often, given the context and situation, the advice I give is pretty general. I think there are some key learnings that are valuable to all entrepreneurs though. They were apparent to me from spending the past 12 weeks working with the 9 LaunchBox08 portfolio companies and the LaunchBox team.
Andrew Nachison, the co-founder of iFocos, a strategic partner of LaunchBox Digital and the organizer of the annual WE Media confernece, attended LaunchBox08 Demo Day. He shared a number of great outside observer insights in his blog post. I will summarize them here:
1. Technology is critical - have a developer on your team
2. Know your target audience
3. Develop and launch quickly, iterate often
4. Find advisors and mentors
5. Be bold, take risks
Andrew Nachison, the co-founder of iFocos, a strategic partner of LaunchBox Digital and the organizer of the annual WE Media confernece, attended LaunchBox08 Demo Day. He shared a number of great outside observer insights in his blog post. I will summarize them here:
1. Technology is critical - have a developer on your team
2. Know your target audience
3. Develop and launch quickly, iterate often
4. Find advisors and mentors
5. Be bold, take risks
Friday, August 8, 2008
LaunchBox08 Demo Day Recap
The past 12 weeks have flown by. It has been a very rewarding experience for all involved. Our 9 portfolio companies have done a phenomenal job developing their offerings and building their businesses. Our advisors have been tremendously supportive with their time and advice mentoring the entrepreneurs. Our sponsors have been generous with their time and services. Demo Days were a hit - great attendance of angel investors, VCs and bloggers in both Reston, VA and Palo Alto, CA; great presentations and product demos by the 9 companies.
John McKinley - LaunchBox co-founder shares his impressions on the 12 weeks of Launchbox08 and each of the 9 companies on his blog.
We're also very appreciative of the coverage we received over the past year from:
Techcrunch
Silicon Alley Insider
GigaOm
The Social Times
Somewhat Frank
East Coast Blogging
VentureBeat
Tech Confidential
Venturewire
John McKinley - LaunchBox co-founder shares his impressions on the 12 weeks of Launchbox08 and each of the 9 companies on his blog.
We're also very appreciative of the coverage we received over the past year from:
Techcrunch
Silicon Alley Insider
GigaOm
The Social Times
Somewhat Frank
East Coast Blogging
VentureBeat
Tech Confidential
Venturewire
Thursday, July 24, 2008
Guest Speaker Series: David Gardner
David Gardner, co-founder of the Motley Fool, invited the LaunchBox08 companies to the Fool Offices in Alexandria, Virginia on 7/8. David shared his guidelines for entrepreneurs and answered questions about the Motley Fool and its exciting new service, CAPS.
Four basic rules for entrepreneurs:
1. Do something that you love
David and his brother grew up with a passion for learning and teaching about the stock market, and they were fascinated by the basic concept that one can own a part of a company that provides great products and services. Their passion has provided the necessary fuel that propelled the Fool into the successful business that it is today.
2. Make sure it is needed
"Business is there to solve problems and/or create new possibilities. The best businesses do both," advises David. His maxim certainly applies to the Motley Fool, which was founded in a time when getting financial advice was expensive and time-consuming. The Fool brought an easy-to-use service to the internet that helped to fill the information void.
3. Do it differently
"Take an angle that people haven't seen before." David and his brother created their service with an entirely different approach by siding with the small investor and creating a lighthearted atmosphere that was drastically different from typical financial advisory firms. Entrepreneurs have the advantage in that they can find the superior business model, even if they are much smaller than the competition.
4. Be ready to evolve.
The ability to respond quickly to changes can make our break your business. In 2001, David and his brother decided to turn the business around from an ad-supported model to a premium services model. The change resulted in a huge rebound in revenues, and brought new levels of success to the Fool.
Four basic rules for entrepreneurs:
1. Do something that you love
David and his brother grew up with a passion for learning and teaching about the stock market, and they were fascinated by the basic concept that one can own a part of a company that provides great products and services. Their passion has provided the necessary fuel that propelled the Fool into the successful business that it is today.
2. Make sure it is needed
"Business is there to solve problems and/or create new possibilities. The best businesses do both," advises David. His maxim certainly applies to the Motley Fool, which was founded in a time when getting financial advice was expensive and time-consuming. The Fool brought an easy-to-use service to the internet that helped to fill the information void.
3. Do it differently
"Take an angle that people haven't seen before." David and his brother created their service with an entirely different approach by siding with the small investor and creating a lighthearted atmosphere that was drastically different from typical financial advisory firms. Entrepreneurs have the advantage in that they can find the superior business model, even if they are much smaller than the competition.
4. Be ready to evolve.
The ability to respond quickly to changes can make our break your business. In 2001, David and his brother decided to turn the business around from an ad-supported model to a premium services model. The change resulted in a huge rebound in revenues, and brought new levels of success to the Fool.
Thursday, July 17, 2008
Guest Speaker Series: Mike Lincoln
On 7/2, Mike Lincoln of Cooley, Godward & Kronish stopped by the LaunchBoxDigital offices to offer his advice about preparing to raise venture capital and avoiding costly legal situations.
Five things that matter when you raise money
- Valuation: Valuation is the overall bottom line about the estimated worth of your company before and after raising a round of financing. This number is important, of course, but entrepreneurs often look at the figure with tunnel vision and forget about other important values that can have a big impact. For this reason, Mike recommends that chemistry between investors and founders should be something that is a high priority issue.
- Vesting: The subject of vesting matters – and it is negotiable. Mike encourages founders to take a look at the IRS Form 83b election, which can prevent a "double-dipping" tax on stocks vesting when dividends are issued to founders. Almost all Series A termsheets allow the venture capital firm to retain founders' stock in the event that they bail out.
- Liquidity preference: The liquidation preference provision basically sets out the hierarchy of who gets paid first. The venture capital firm's stock will be higher on the food chain than the founders, and the amount will typically be the amount invested by the firm. Several components of this provision are generally negotiable, such as the participation right, blocking rights, and board composition.
- Drag-along provision: This contract provision requires the forced sale of a company if a certain threshold amount of stockholders votes in favor of the sale. Some key points that are usually negotiable include what parties can participate, what the threshold amount is (e.g. 50% of preferred, etc), and the minimum acceptable price.
Five things that matter when you raise money
- Valuation: Valuation is the overall bottom line about the estimated worth of your company before and after raising a round of financing. This number is important, of course, but entrepreneurs often look at the figure with tunnel vision and forget about other important values that can have a big impact. For this reason, Mike recommends that chemistry between investors and founders should be something that is a high priority issue.
- Vesting: The subject of vesting matters – and it is negotiable. Mike encourages founders to take a look at the IRS Form 83b election, which can prevent a "double-dipping" tax on stocks vesting when dividends are issued to founders. Almost all Series A termsheets allow the venture capital firm to retain founders' stock in the event that they bail out.
- Liquidity preference: The liquidation preference provision basically sets out the hierarchy of who gets paid first. The venture capital firm's stock will be higher on the food chain than the founders, and the amount will typically be the amount invested by the firm. Several components of this provision are generally negotiable, such as the participation right, blocking rights, and board composition.
- Drag-along provision: This contract provision requires the forced sale of a company if a certain threshold amount of stockholders votes in favor of the sale. Some key points that are usually negotiable include what parties can participate, what the threshold amount is (e.g. 50% of preferred, etc), and the minimum acceptable price.
Friday, June 13, 2008
Guest Speaker Series: Ted Leonsis
Ted Leonsis, one of the D.C. area's most successful entrepreneurs and business leaders, took some time out of his busy schedule to speak to the LaunchBox08 companies on June 12th. By sharing his personal experiences, Ted offered his wisdom about success and happiness to the LaunchBox08 entrepreneurs.
General characteristics of most successful entrepreneurs:
1. Young and not tied down. Launching a startup is a big risk. This risk is magnified when there are spouses, children, and mortgages in the picture. For that reason, many successful entrepreneurs tend to be younger and more able to accept risk.
2. Not a defensive bone in their body. In order to succeed, it is essential for an entrepreneur to take criticism and feedback from advisors and team members. Ted asks, "do you want to be right, or do you want to win?"
3. Obsessive about the product. Another commonality that Ted has observed in successful entrepreneurs is their zeal towards perfecting the product. At AOL, Ted would start every day by taking a tour of the service and correcting or improving any issues he encountered.
4. Built teams and partners based on an intense reflection about their strengths and weaknesses. Great leaders understand that they too have weaknesses, and they surround themselves with other great leaders who fill those gaps. Building teams and knowing as a founder what you are good at and where you need help is one of the most important characteristics of success.
5. Double bottom line: do well, while doing good. The best businesses are ones that create a win-win situation and help make the world a better place. This type of thinking is reflected in Google's "do no evil" mantra.
The pursuit of happiness. Ted has done a great deal of thinking and research about what makes people happy. His view is that happy people are successful people. As a result of survey information from over 50,000 households, Ted has found these five variables to be the most correlated with happiness:
1. Active participant in multiple communities of interest
2. Avenue for personal expression (there is a reason why there are 77 million blogs)
3. Empathy and gratitude
4. Volunteerism and giving back
5. Pursuit of a higher calling
General characteristics of most successful entrepreneurs:
1. Young and not tied down. Launching a startup is a big risk. This risk is magnified when there are spouses, children, and mortgages in the picture. For that reason, many successful entrepreneurs tend to be younger and more able to accept risk.
2. Not a defensive bone in their body. In order to succeed, it is essential for an entrepreneur to take criticism and feedback from advisors and team members. Ted asks, "do you want to be right, or do you want to win?"
3. Obsessive about the product. Another commonality that Ted has observed in successful entrepreneurs is their zeal towards perfecting the product. At AOL, Ted would start every day by taking a tour of the service and correcting or improving any issues he encountered.
4. Built teams and partners based on an intense reflection about their strengths and weaknesses. Great leaders understand that they too have weaknesses, and they surround themselves with other great leaders who fill those gaps. Building teams and knowing as a founder what you are good at and where you need help is one of the most important characteristics of success.
5. Double bottom line: do well, while doing good. The best businesses are ones that create a win-win situation and help make the world a better place. This type of thinking is reflected in Google's "do no evil" mantra.
The pursuit of happiness. Ted has done a great deal of thinking and research about what makes people happy. His view is that happy people are successful people. As a result of survey information from over 50,000 households, Ted has found these five variables to be the most correlated with happiness:
1. Active participant in multiple communities of interest
2. Avenue for personal expression (there is a reason why there are 77 million blogs)
3. Empathy and gratitude
4. Volunteerism and giving back
5. Pursuit of a higher calling
Guest Speaker Series: Jim Bankoff
Jim Bankoff, formerly the Executive Vice President of Programming and Products at AOL, gave a presentation entitled "How to work with big companies" on June 5th at the LaunchBox Digital offices. Jim spent 10 years at AOL in internet and content services and has been involved with many other successful businesses including Audible and Qloud. Today, he works with Providence Equity, a firm that invests in online media, traditional media, and web businesses (Nextag, Hulu).
Know what you are getting into. Working with a big company is taking a big risk. Big companies have leverage over you because if they don't make the deal, their business will continue. However, your company could be made or broken on that particular deal. For example, Microsoft partnered with IBM to license its operating system and the rest is history. AOL made a strategic decision early on to outsource search technology to Google when they were young and searching for credibility.
Five reasons to work with a big company
1. Marketing. Big companies have invested billions of dollars in their platforms, and while they might partner with you, it isn't going to be for free. Here are some considerations when it comes to a marketing agreement:
- Don't get carried away to the point that you are blind to the core metrics that you would use across distribution channels. Remember, it is just another marketing channel - like all others, it must be evaluated on its own merits (typically, cost per acquisition, lifetime value of customer).
- Brand positioning: Compromise might come in the form of minimizing your direct to consumer brand. Often there is a co-branded relationship where you alter your product to look a little more like theirs. This might involve minimizing your logo, traffic to your URL, etc. Understand what it is going to do to your brand, time and resources, and economics.
- Level of exclusivity - know what kind of tradeoffs you are making.
- Alternative channels - Increasingly, platforms are opening up and the emergence of APIs allows you to get viral by plugging into bigger entities. In doing so, you can achieve a lot of benefits of customer acquisition without much of a signed agreement except for the Terms of Service.
2. Selling to them
Companies might struggle to do both B2B and B2C well. Powering someone else's platform with your service will provide a big check, but could compromise your efforts. If you feel like you don't have a big viral or organic marketing, maybe it is a good idea to power someone else's community. However, know that big customers demand your time and attention and they can overwhelm you with questions and customer service.
3. Monetization
Ad-supported or subscription-supported models provide opportunities to piggyback on other companies' sales forces.
4. Technology
Companies are now building businesses off of technology infrastructure. The most obvious example today is Amazon. Always have market-to-market knowledge about who is making the next platform commitment (e.g. Android, iPhone, etc). All three big email providers are trying to open up their mail experience to allow businesses to expand the experience and take advantage of the platform.
5. Financing
While raising money has its obvious advantages, financing can also be a de facto way for a company to have a first look at buying you out. Consider whether other potential investors will find it to be a turnoff, and whether you are limiting your opportunities by choosing one partner over another. Alternatively, a startup can bridge the gap by offering warrants in the company - options that are given if the startup's value grows as a result of the partnership. It may also be helpful to include an "unwind" provision, which agrees up front to dissolve the partnership between both parties if it isn't successful.
Know what you are getting into. Working with a big company is taking a big risk. Big companies have leverage over you because if they don't make the deal, their business will continue. However, your company could be made or broken on that particular deal. For example, Microsoft partnered with IBM to license its operating system and the rest is history. AOL made a strategic decision early on to outsource search technology to Google when they were young and searching for credibility.
Five reasons to work with a big company
1. Marketing. Big companies have invested billions of dollars in their platforms, and while they might partner with you, it isn't going to be for free. Here are some considerations when it comes to a marketing agreement:
- Don't get carried away to the point that you are blind to the core metrics that you would use across distribution channels. Remember, it is just another marketing channel - like all others, it must be evaluated on its own merits (typically, cost per acquisition, lifetime value of customer).
- Brand positioning: Compromise might come in the form of minimizing your direct to consumer brand. Often there is a co-branded relationship where you alter your product to look a little more like theirs. This might involve minimizing your logo, traffic to your URL, etc. Understand what it is going to do to your brand, time and resources, and economics.
- Level of exclusivity - know what kind of tradeoffs you are making.
- Alternative channels - Increasingly, platforms are opening up and the emergence of APIs allows you to get viral by plugging into bigger entities. In doing so, you can achieve a lot of benefits of customer acquisition without much of a signed agreement except for the Terms of Service.
2. Selling to them
Companies might struggle to do both B2B and B2C well. Powering someone else's platform with your service will provide a big check, but could compromise your efforts. If you feel like you don't have a big viral or organic marketing, maybe it is a good idea to power someone else's community. However, know that big customers demand your time and attention and they can overwhelm you with questions and customer service.
3. Monetization
Ad-supported or subscription-supported models provide opportunities to piggyback on other companies' sales forces.
4. Technology
Companies are now building businesses off of technology infrastructure. The most obvious example today is Amazon. Always have market-to-market knowledge about who is making the next platform commitment (e.g. Android, iPhone, etc). All three big email providers are trying to open up their mail experience to allow businesses to expand the experience and take advantage of the platform.
5. Financing
While raising money has its obvious advantages, financing can also be a de facto way for a company to have a first look at buying you out. Consider whether other potential investors will find it to be a turnoff, and whether you are limiting your opportunities by choosing one partner over another. Alternatively, a startup can bridge the gap by offering warrants in the company - options that are given if the startup's value grows as a result of the partnership. It may also be helpful to include an "unwind" provision, which agrees up front to dissolve the partnership between both parties if it isn't successful.
