John Connor predicts
http://futurerating.blogspot.com/2011/06/mobile-trends.html
2011/06/09
2011/05/24
New forms of startups financing.
Why use Series Seed Documents instead of capped convertible debt?
This seems to be the real issue. In my opinion, the reason that capped convertible debt is the current market leader is that entrepreneurs have been conditioned over time to believe that convertible debt is (a) faster (b) cheaper and (c) better for them than equity investment. This is EXACTLY why I created the Series Seed Documents. With Series Seed:
· Costs should be roughly the same (if not cheaper) than using industry standard debt documents. There are a number of different convertible debt documents out there and there will likely be some back and forth whereas these are standard documents.
· Same point for speed. If parties agree to Series Seed Documents, should be faster than debt documents since there is some negotiation with debt documents from sophisticated investors.
· Series Seed Documents are transparent: no hidden gotchas can get served up in definitive documents. You can review them right now if you want.
· Equity documents give investors more clear definition around rights, more stability and less potential squabbling in the next round.
· Equity gives investors the opportunity to get long term capital gains tax treatment if early exit.
· With minor manipulation, Series Seed enables multiple board structures without tortured and non-functioning agreements (a real problem for convertible debt documents); and
· Entrepreneurs get price certainty instead of the lower of two different prices as with capped debt.
In sum, Series Seed creates a level playing field between capped debt and equity documents in terms of speed and cost. When one studies the (admittedly highly technical) benefits of Series Seed vs. price debt, Series Seed is a better solution.
There has been a robust debate on this topic with folks like Fred Wilson, Paul Graham and Seth Levine all chiming in. To clarify, there is no question that as an entrepreneur you would prefer uncapped convertible debt to equity. As Josh and many others point out, this is typically not a fair deal for the investors and many investors won’t do it, or will only do it for people that they are blindly in love with. Also, Seth raises some interesting points about ecosystem health, though most entrepreneurs I know aren’t too concerned about killing the golden goose. Once a price cap has been introduced, however, Series Seed Documents are a better solution to getting the first round complete for both entrepreneurs and investors.
This seems to be the real issue. In my opinion, the reason that capped convertible debt is the current market leader is that entrepreneurs have been conditioned over time to believe that convertible debt is (a) faster (b) cheaper and (c) better for them than equity investment. This is EXACTLY why I created the Series Seed Documents. With Series Seed:
· Costs should be roughly the same (if not cheaper) than using industry standard debt documents. There are a number of different convertible debt documents out there and there will likely be some back and forth whereas these are standard documents.
· Same point for speed. If parties agree to Series Seed Documents, should be faster than debt documents since there is some negotiation with debt documents from sophisticated investors.
· Series Seed Documents are transparent: no hidden gotchas can get served up in definitive documents. You can review them right now if you want.
· Equity documents give investors more clear definition around rights, more stability and less potential squabbling in the next round.
· Equity gives investors the opportunity to get long term capital gains tax treatment if early exit.
· With minor manipulation, Series Seed enables multiple board structures without tortured and non-functioning agreements (a real problem for convertible debt documents); and
· Entrepreneurs get price certainty instead of the lower of two different prices as with capped debt.
In sum, Series Seed creates a level playing field between capped debt and equity documents in terms of speed and cost. When one studies the (admittedly highly technical) benefits of Series Seed vs. price debt, Series Seed is a better solution.
There has been a robust debate on this topic with folks like Fred Wilson, Paul Graham and Seth Levine all chiming in. To clarify, there is no question that as an entrepreneur you would prefer uncapped convertible debt to equity. As Josh and many others point out, this is typically not a fair deal for the investors and many investors won’t do it, or will only do it for people that they are blindly in love with. Also, Seth raises some interesting points about ecosystem health, though most entrepreneurs I know aren’t too concerned about killing the golden goose. Once a price cap has been introduced, however, Series Seed Documents are a better solution to getting the first round complete for both entrepreneurs and investors.
2011/05/09
Startups Valuation secrets
The valuations of today’s private tech leaders – Facebook, Zynga, Groupon and possibly Twitter – are such that I believe upwards of 50-75% of the terminal values of these companies will be captured by the folks who did the real work and took the real risks, those who quit their jobs and begged, borrowed and cajoled friends, families and angel investors to take a chance on their far-fetched idea.
Here is the important, and game-changing, point: in order to participate in the great wealth creation taking place in this and future technology cycles, you will have to be a founder, an early employee or a private investor. The so-called easy money will be earned before a company goes public. This is a radical shift from earlier technology cycles.
The second factor contributing to the far high valuations accruing to private companies today is the speed at which companies can now exploit the global marketplace. When I was at idealab in the 1990s, none of our start-ups attempted to address international markets in the first few years of their existence. In fact, for many of those companies, international markets didn’t become a serious focus until after they went public. How times have changed.
Today it is possible to pursue an international growth strategy almost as quickly as a domestic one. The cost of running a global business has dramatically shrunk, and while costs of going overseas have plummeted, the revenue opportunities have increased manifold.
Just consider where three of the largest economies were 10 years ago, and where they are today. India was a $500 billion economy in 2000. Today it is a $1.4 trillion one. Brazil was a $600 billion economy ten years ago, compared to $2 trillion in 2010. The growth of China’s economy in the last decade is breathtaking, from $1.2 trillion to $5.7 trillion in just 10 years. Combined, these three economies have added $6.8 trillion to world GDP since 2000.
Public investors are aware of these economic figures, and they are rewarding companies addressing the global marketplace sooner in their lifecycle. Groupon has taken note. It is just four years old and already operates in 35 countries. Given its international ambitions, it is likely that within two years Groupon will have upwards of 20,000 employees outside of the U.S. A potential $25 billion IPO valuation awaits it for going global faster than its peers.
What makes the change I have just described so fascinating is that so many of the traditional limited partners to venture capital funds have withdrawn from the asset class in the last few years, understandable perhaps after 10 years of poor returns. But just as the game has shifted to rewarding private investors over public shareholders like never before, limited partners have decided to look elsewhere for exceptional returns.
I believe that is a mistake.
Going forward, those who participate in building new companies and providing the start-up capital to fuel the growth of those businesses, will be handsomely rewarded like never before.
http://futurerating.blogspot.com/2011/05/startup-valuation.html
Here is the important, and game-changing, point: in order to participate in the great wealth creation taking place in this and future technology cycles, you will have to be a founder, an early employee or a private investor. The so-called easy money will be earned before a company goes public. This is a radical shift from earlier technology cycles.
The second factor contributing to the far high valuations accruing to private companies today is the speed at which companies can now exploit the global marketplace. When I was at idealab in the 1990s, none of our start-ups attempted to address international markets in the first few years of their existence. In fact, for many of those companies, international markets didn’t become a serious focus until after they went public. How times have changed.
Today it is possible to pursue an international growth strategy almost as quickly as a domestic one. The cost of running a global business has dramatically shrunk, and while costs of going overseas have plummeted, the revenue opportunities have increased manifold.
Just consider where three of the largest economies were 10 years ago, and where they are today. India was a $500 billion economy in 2000. Today it is a $1.4 trillion one. Brazil was a $600 billion economy ten years ago, compared to $2 trillion in 2010. The growth of China’s economy in the last decade is breathtaking, from $1.2 trillion to $5.7 trillion in just 10 years. Combined, these three economies have added $6.8 trillion to world GDP since 2000.
Public investors are aware of these economic figures, and they are rewarding companies addressing the global marketplace sooner in their lifecycle. Groupon has taken note. It is just four years old and already operates in 35 countries. Given its international ambitions, it is likely that within two years Groupon will have upwards of 20,000 employees outside of the U.S. A potential $25 billion IPO valuation awaits it for going global faster than its peers.
What makes the change I have just described so fascinating is that so many of the traditional limited partners to venture capital funds have withdrawn from the asset class in the last few years, understandable perhaps after 10 years of poor returns. But just as the game has shifted to rewarding private investors over public shareholders like never before, limited partners have decided to look elsewhere for exceptional returns.
I believe that is a mistake.
Going forward, those who participate in building new companies and providing the start-up capital to fuel the growth of those businesses, will be handsomely rewarded like never before.
http://futurerating.blogspot.com/2011/05/startup-valuation.html
2011/04/30
VCs has the largest quarter since 2001
Venture capital funds in the U.S. raised $7.7 billion in the first quarter of 2011, nearly doubling the $3.9 billion raised in the same period last year and the highest first-quarter total since 2001. At the same time, only 25 funds closed this past quarter--not just a dip from the same time last year but actually the lowest count of first-quarter closings since 2003.
http://vator.tv/news/2011-04-11-private-equity-and-venture-capital-up-and-up
It leads to increasing activity of venture incubators
http://vator.tv/news/2011-04-01-super-angels-create-incubator-for-incubators
http://vator.tv/news/2011-04-11-private-equity-and-venture-capital-up-and-up
It leads to increasing activity of venture incubators
http://vator.tv/news/2011-04-01-super-angels-create-incubator-for-incubators
2011/04/20
Why social media is so attractive for investors?
WallMart buys Kosmix for $300 mln. http://futurerating.blogspot.com/2011/04/walmart-buys-social-media-startup.html
It's a great example of "parking", a crucial VC skill that VCs don't like to talk about.
What is parking? It's finding a good acquisition for a startup that didn't do as well as you expected.
Venture capital is described as a "hits business" and that's true enough: a few exits produces the majority of the returns. 80% of VC profits comes from 2% of deals, a top European VC told us.
But that's only part of the story. A rule of thumb is that to be considered a good performer, a VC fund has to return three times its capital. But in many a VC fund, while 2X will come from the big hits, the third piece will come from smaller "long tail" exits, which individually might not make a big difference to the fund, but when added up can make or break it.
So "parking well" is a very important VC skill. And it comes down to the VC to park a company that hasn't been performing as well as expected, because most often they're the ones who have the industry relationships and the M&A experience, not the entrepreneurs.
VCs don't like to talk about parking because they'd much rather talk about helping startups grow into huge blockbusters than mitigating losses on underperforming investments.
And Kleiner Perkins is known in the industry for being great at parking.
In a talk at Stanford, when talking about how VCs need to be good at finding exits for their companies, straight-talking VC Mark Suster phrased it thus: "Are you Kleiner? Can you get $400 million for ngmoco when it probably wasn't worth it?," adding jokingly: "Oh, maybe it was worth it."
The point here isn't to diss mobile gaming company ngmoco (your writer enjoyed many wasted hours on Rolando, one of their hit games), but it pivoted several times in search of a business model and when the acquisition happened, many eyebrows were raised at both the price and the acquirer, DeNA, a big Japanese gaming company that had done practically no US acquisitions to date.
Read more: http://www.businessinsider.com/whrrl-pelago-kleiner-perkins-2011-4?utm_source=Triggermail&utm_medium=email&utm_term=10%20Things%20In%20Tech%20You%20Need%20To%20Know&utm_campaign=Post%20Blast%20%28sai%29%3A%2010%20Things%20You%20Need%20To%20Know%20This%20Morning#ixzz1K4SUq8VY
It's a great example of "parking", a crucial VC skill that VCs don't like to talk about.
What is parking? It's finding a good acquisition for a startup that didn't do as well as you expected.
Venture capital is described as a "hits business" and that's true enough: a few exits produces the majority of the returns. 80% of VC profits comes from 2% of deals, a top European VC told us.
But that's only part of the story. A rule of thumb is that to be considered a good performer, a VC fund has to return three times its capital. But in many a VC fund, while 2X will come from the big hits, the third piece will come from smaller "long tail" exits, which individually might not make a big difference to the fund, but when added up can make or break it.
So "parking well" is a very important VC skill. And it comes down to the VC to park a company that hasn't been performing as well as expected, because most often they're the ones who have the industry relationships and the M&A experience, not the entrepreneurs.
VCs don't like to talk about parking because they'd much rather talk about helping startups grow into huge blockbusters than mitigating losses on underperforming investments.
And Kleiner Perkins is known in the industry for being great at parking.
In a talk at Stanford, when talking about how VCs need to be good at finding exits for their companies, straight-talking VC Mark Suster phrased it thus: "Are you Kleiner? Can you get $400 million for ngmoco when it probably wasn't worth it?," adding jokingly: "Oh, maybe it was worth it."
The point here isn't to diss mobile gaming company ngmoco (your writer enjoyed many wasted hours on Rolando, one of their hit games), but it pivoted several times in search of a business model and when the acquisition happened, many eyebrows were raised at both the price and the acquirer, DeNA, a big Japanese gaming company that had done practically no US acquisitions to date.
Read more: http://www.businessinsider.com/whrrl-pelago-kleiner-perkins-2011-4?utm_source=Triggermail&utm_medium=email&utm_term=10%20Things%20In%20Tech%20You%20Need%20To%20Know&utm_campaign=Post%20Blast%20%28sai%29%3A%2010%20Things%20You%20Need%20To%20Know%20This%20Morning#ixzz1K4SUq8VY
2011/04/07
More exits in venture market
During the quarter, 109 venture-backed companies were acquired. Of the 45 deals where the acquisition price was disclosed, the total purchase prices added up to $5.9 billion.
http://ierarhia.blogspot.com/2011/04/vc-go-ipo.html
http://ierarhia.blogspot.com/2011/04/vc-go-ipo.html
2011/03/31
Google vs Facebook
What scares Google about Twitter and Facebook is that people are using them to share links, "like" web pages, and favorite tweets. People are using Twitter and Facebook to say what they think are the most important things on the Internet.
Because Twitter and Facebook are black boxes Google can't crawl, it no longer has access to anything close to 100% of the best meta-data available for sorting and organizing the Internet.
If Google had that data – and if it its users felt they needed to set up Google accounts – it would be able to offer better, more personalized search. It would be able to recommend content and Web pages to its users without asking them to search.
Google doesn't have that data and at from it's very highest levels on down, the company is worried that its search will slowly become a less important tool for navigating the Internet.
Read more: http://www.businessinsider.com/political-infighting-overlapping-projects-slowing-googles-facebook-killer-2010-12#ixzz1IBd3wRbJ
Google's new +1 service is not just about Google taking on Facebook. It's also a great way for Google to make its search results relevant again.
Researcher Vivek Wadwha is largely to blame (or credit) for calling attention to Google's increasingly spammy search results. His post for TechCrunch on New Year's Day entitled "Why We Desperately Need A New (And Better) Google" got people talking, and may have been one big reason why Google changed its search algorithms last month to penalize content farms like Demand Media.
Last night at a dinner for journalists sponsored by alternative search engine Blekko, Wadwha was at it again: he insisted that Google's search results still suck, that the changes didn't help, and that any search engine that relies entirely on algorithms will always be gamed by scammers looking to divert more of the search firehose their way -- there's just too much money at stake.
Because Twitter and Facebook are black boxes Google can't crawl, it no longer has access to anything close to 100% of the best meta-data available for sorting and organizing the Internet.
If Google had that data – and if it its users felt they needed to set up Google accounts – it would be able to offer better, more personalized search. It would be able to recommend content and Web pages to its users without asking them to search.
Google doesn't have that data and at from it's very highest levels on down, the company is worried that its search will slowly become a less important tool for navigating the Internet.
Read more: http://www.businessinsider.com/political-infighting-overlapping-projects-slowing-googles-facebook-killer-2010-12#ixzz1IBd3wRbJ
Google's new +1 service is not just about Google taking on Facebook. It's also a great way for Google to make its search results relevant again.
Researcher Vivek Wadwha is largely to blame (or credit) for calling attention to Google's increasingly spammy search results. His post for TechCrunch on New Year's Day entitled "Why We Desperately Need A New (And Better) Google" got people talking, and may have been one big reason why Google changed its search algorithms last month to penalize content farms like Demand Media.
Last night at a dinner for journalists sponsored by alternative search engine Blekko, Wadwha was at it again: he insisted that Google's search results still suck, that the changes didn't help, and that any search engine that relies entirely on algorithms will always be gamed by scammers looking to divert more of the search firehose their way -- there's just too much money at stake.
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