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Why Silicon Valley Can’t Find Europe | TechCrunch

Why Silicon Valley Can’t Find Europe | TechCrunch | Venture Capital Stories |

Go to Europe these days – to Berlin, London, Helsinki – drop in in on any of the regional tech confabs and you will quickly see that the European startup scene is in the most bustling, vibrant shape it’s ever been. The potential is everywhere, and the energy is undeniable. Then you return Stateside, in my case to Palo Alto, and Europe isn’t just irrelevant among the tech industry power-set. It has virtually ceased to exist.

That is a mistake. Blame for the ruptured relationship lies on both sides of the Atlantic, but it is Europeans that have the power, and should have the motivation, to mend things.

To read the full article, click on the title.

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Via Marylene Delbourg-Delphis
Marc Kneepkens's insight:

Excellent. This article points out very accurately how Europe is out of the picture at Silicon Valley, and what can be done about it.

Andrew Rauch's curator insight, January 20, 9:10 AM

Good new for me and my colleagues...

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This Man Is on a Mission to Turn NYC Into a Tech Magnet | Enterprise | WIRED

This Man Is on a Mission to Turn NYC Into a Tech Magnet | Enterprise | WIRED | Venture Capital Stories |
Inside the plan to lure more top engineers to the Big Apple.

When Alex Iskold became the managing director of Techstars New York, he came armed with a secret weapon: a script he had written that crawls the web for new startups and assesses whether or not they’d be a good fit for the Big Apple incarnation of this burgeoning tech accelerator.

Just what those metrics are, Iskold isn’t saying. “I don’t want to give out all of our tricks,” he says, laughing. But it’s not too hard to figure out what Iskold is looking for. A serial entrepreneur himself, he has founded and sold two companies, including, most recently, GetGlue, a television social network. Now, at the helm of one of New York City’s largest tech accelerators, this engineer by training is on a mission to bring what he calls “heavy tech” to New York City.1

If Techstars can help build these heavy tech companies, Iskold believes, the engineers will come. The aim, ultimately, is to turn New York into a true tech hub. That will take some doing, but Iskold’s work is part of a much larger effort to bring more tech minds to New York, a city that leads the world in so many things but trails places like Boston and Silicon Valley in terms of engineering talent.

Technology Is The Business

Iskold defines “heavy tech” companies as any business for which the technology itself is the primary reason for being. As examples, he lists New York City success stories like MongoDB, an open-source NoSQL database; MakerBot, a 3-D printing company, and Digital Ocean, a cloud hosting service and Techstars graduate. “With, say, e-commerce and finance startups, tech supports the business,” he says, “but with companies like MongoDB, Digital Ocean, and even MakerBot, the technology is the business.”

Some such companies appeared in Techstars’ most recent batch of startups, the first that Iskold had a hand in selecting. Beside the consumer products and apps were companies like Tutum, a cloud infrastructure outfit that hosts applications packaged in Docker containers. Another startup, Standard Analytics, has created a massive database of scientific information that transforms scientific articles into standard API to make research searchable and replicable. Still another company, Rival Theory, uses artificial intelligence to design emotionally intelligent characters for gaming. Such big, technologically challenging ideas might not fit the standard New York City tech archetype, but Iskold is determined to change that.

An Engineering Firehose

He’s not alone. In recent years, both local New York government and universities have been working toward much the same goal, which is precisely why Iskold says now is the time to begin fostering more engineering intensive companies. Unlike Boston, where MIT engineers are plentiful, and the Valley, which is a stone’s throw from Stanford’s engineering school, New York’s universities have never been a firehose of engineering talent. Instead, schools like Columbia and New York University, have traditionally been better known for their arts and business programs.

Now, that’s starting to change. NYU, for one, recently finalized its merger with Polytechnic University and opened the NYU Polytechnic School of Engineering. Meanwhile, construction is now underway for the Cornell NYC Tech campus, which is set to open in 2017. “That’s going to be firepower,” Iskold says.

Still, despite his enthusiasm about these new developments, Iskold knows it will take years, and perhaps even a decade or more, to transform New York City into a true tech center. Silicon Valley investors, for one, still have the deepest pockets. And yet, he knows that the only way to grow the venture capital community in New York, is to build worthy companies first. “It’s a chicken or egg problem,” Iskold says. “In the Valley, you had the PayPal mafia and other people from 20 years ago with successful exits, who then became angels, and funded other companies. It’s a virtuous cycle.”

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What is a VC/Angel Investor Looking For?

This was an entry on Quora by Noam Kaiser, on June 16,2013 as a response to the question above.  It is a very detailed piece of information that is worthwhile reading for any entrepreneur or startup looking for funding.

So what is an investor looking for?
At the end of the day it’s all about people.
But if we choose to elaborate a bit, talking about entrepreneurship and Investors, is actually talking about a story.
It's a story about an enterprise with a unique solution to a serious problem or gap, ensuring a nice ROI for investors, by a team whose history and status make it too early to obtain an institutionalized loan or rely on is own income for growth and development.
You, the founders, are the story tellers.
The best way to summarize the story into a “Reader’s Digest” is the Executive Summary, which will, in many cases, be the determining factor of whether you guys secure a meeting with investor or not.

First of all the Investor needs to understand what it is you are doing - it can be simple, it’s usually not. It will most likely have a twist otherwise the story is boring.
The question you need to ask yourselves is whether the potential  investor – having met you, or read the executive summary -  can now tell a third party, in less than a minute, what you and your team are doing?  Remember, you do not necessarily speak to the decision maker first time around, and even if you are, they would still probably seek consultation.
The feedback they get from whomever they talk to should be positive (for your own sake), but even more importantly: If the investors cannot encapsulate it into a short, clear, easy to remember pitch ... they won’t.
Work on the pitch – It must be short, catchy and comprehensive. Yes, this is one of the most difficult things to accomplish. (Twitter is a good place to practice this type of concise writing)

There are those (lowly uninitiated fools) who will not agree with me here, but the next component is the most crucial one:  Whether consciously or not, the investor’s impression is comprised more than anything else - by you.
As noted at the top, the people are the story in a nut shell:
Your proficiency, your confidence, the reliability you convey, and (if you’re a team) the chemistry and the hierarchy that exists between you, your ability to listen and accept criticism - all of these speak louder than words.
I’ll put it this way, if a colleague tells me everything seems to check out but he can’t get over the impression that he can’t trust the founder 100%, or that the founder is not open for advice or insight, my recommendation would be “Drop it now”.
If asked to give a common characteristic of the most successful companies I’ve been fortunate enough to work with, it would be "Team”.
In this context, there are two tips regarding how you should conduct yourself in a meeting. They’re at the bottom, so scroll down now if you’re falling asleep.

There is one gap that’s very difficult to bridge: Experience. Usually a successful entrepreneur is a credited professional in his/her field of expertise, who stumbled upon the gap/need as part of his/her daily activity and worked out  a unique solution for it. (That's as relevant with technology as it is with business and commerce).                                                                                                                          
If this gap exists, and you've figured out a solution, however you are NOT a field expert, there is an alternative bridge: Start working.
This, by the way, is true even if you are the No.1 expert in the field in which you are operating in. You started something, you did not sit around waiting on the money or the safety net – This serves as testimony for your entrepreneurial character more than any Power Point presentation or a 100 page business plan ever would. This gives the investors some much required comfort as it conveys “Look, I’m also putting something on the line here, you’re not the only one taking a chance”. There’s a reason why “Startup” begins with "start".
Now we come to the reason we are all adjourned. You are here with the investor because you figured out something: A Need.
There are three questions in this context:
First: Does the need exist? (You'd be surprised how many times it doesn’t, no lack of examples on this one, as I’m positive any seasoned investor would agree with)
Second: Is it unmet or resolved? (Something that does the same thing 5 minutes faster and 2 dollars cheaper is not a reason to start a brand new company)
Third: Does the need constitute a significant market? (Yes, there could be one guy in the Himalaya who really needs this but…you know…)
There’s not much point for me going on about need, it is the basis for everything, every innovation. If the investor does not understand it or does not agree that it’s there,  whatever you say later might as well be in ancient Sanskrit.
If you take away one word off this post, make sure its "Need." And by the way, if you explained the need well, and the investor hasn’t spent the last decade excavating on Mars, you’ve pretty much explained the opportunity as well.

A word about patents: There are areas into which you can’t even dream of venturing unless you possess a significant granted patent: Medical devices, pharmaceutical, Semiconductors. Then there are some areas where it would just be a waste of time and money.                                 
When a person tells you the first thing you have to do once you come up with an Idea is to issue a patent , they are either clueless, or Intellectual Property Lawyers.. .                                                         
Where and when it is required, use professionals (Peer recommendation and prior Google search on service provider highly advisable). what you do on your own won’t cut it, and as for cost- there are some cost effective IP protections mechanisms.
In any case this leads us to the competition element.

Competition is one of the most complex elements, and the one in which entrepreneurs tend to go easy on themselves. Here's a tip: a serious investor, once he/she figures out the sector/subsector in which you operate, will – as first thing -  check the competition. Leaders, innovators, Disruptors.  So here’s my suggestion: Beat them to the clock. Know your competitors WELL.
There’s nothing easier for an investor to turn you down over.
(A little tip on investment methodology: Investors are swamped with opportunities and try to turn them all down. It’s those little few they can’t that they end up investing in)

Don’t get me wrong: competition is above all a positive finding.
Basicly, an entrepreneur is an optimistic person running towards a cliff, truly believing they will find a staircase when they get there. A person who does this is either a genius or a madman, so seeing another crazy person running in the same direction alongside you is definitely comforting!
I did say entrepreneurs give themselves an easy time on competition, so here’s a couple of examples:
1. Not taking the time to look into competitors thoroughly, or assuming they know them well enough when they don’t.                                                                                                                                             
2. Ignoring indirect competition - my definition of “Direct Competition”? A different solution for satisfying the same need, basicly competing over the same money. The definition of direct competition is absolutely NOT the same idea. Sometimes the most fierce completion a product has isn’t another product at all, it could be a service, for example.
In any case, there is no such thing as “No competition” so the big question to ask yourselves before sitting down to write a summary is: What differentiates Me? (Note that you can have a unique differentiation which isn’t worth a thing. This correlates directly back to the Need component)

Speaking of need, here’s what the investor needs: ROI (Return on Investment).
It is important to not only demonstrate, but to truly gain a deep and comprehensive understanding of the market and specifically the niche in which you hope to become active in. Among other things, it will enable YOU to truly realize and work out what the TAM (Total Available Market) for your product /service really is.
There are two ways to reach a TAM figure: Bottom-Up & Top-Down.
Top-Down is... well, it’s nice, but it doesn’t really say much, does it?:
"Here’s a nice pie chart, and you can clearly see the market is $1.3 Billion, and we’re going to secure this nice 7% slice”
This type of claim is difficult for you to establish; it is difficult for the investor to imagine it actually playing out.
Bottom-Up. That’s where your story is. One product at a time, one license sold, one sale closed. “I know how to build my market share up, I know what it takes to sell and how much each sale costs me.”  Sounds more convincing, right?                                                                                                                                                          Top-Down is relevant when you can show how both stories intersect – This many sales over this many years will secure this much revenue, that amounts to this share of the total market.                   
Do the math, question it, make sure it adds up.
Remember, investors have alternatives, not necessarily dangerous (Mentioned competition before - Here it’s really not direct, however it is over the same money), you have to give them a story that justifies the added risk. The investor is not looking to get his/her money back nor to make a 100% profit. They’re looking for a multiplier. (Certainly not less than X3 on the money for risky investments)                                                                                                                                                          Scroll back up a for second and recall - You’re writing a story. We’re looking for a happy ending here, not “Games of the thrones” Season 3, Episode 9. (Worry not, no spoiler alerts required)
When all is said and done, the investors will ask two questions, and by the way, they will ask them whether they are hot  for the deal or ice cold:
1. How much are you looking to raise?
2. What exactly for?
This is where you need to do your homework VERY well and think small.
You need to focus on milestones, which are by definition, significant achievements (Technological/Business) in terms of establishing or increasing you company's value and you must be able to draw the road map to secure them. This plan should be in accordance with a correlating budget, one that you must have at hand and know down to the number of ball pens on your desk , but only demonstrate - at first stage -  on the fiscal quarter and segment level.
Lastly, I promised a couple of “Behavioral” tips:
The first: An optimistic attitude does NOT assure success. A pessimistic attitude ASSURES failure.
The second: Learn to accept and even love changes. They’ll come anyway.
If you truly let these injury-based insights sink in and become part of your character DNA, they will be evident and the investors will pick up on it.
And guess what? They’ll pick up on their absence as well.

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Looking for funding? Take a look at this excellent piece that was published on Quora.

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5 Ways to Improve Your Venture Capital Pitch

5 Ways to Improve Your Venture Capital Pitch | Venture Capital Stories |

Tips from a man who's seen his fair share of pitches.

This article is part of DBA, a new series on Mashable about running a business that features insights from leaders in entrepreneurship, venture capital and management.

If you're a founding member of a tech startup, the odds are good that at some point you will find yourself pitching a venture capital firm to raise money. Over the years, I've seen a broad array of these pitches, ranging from the cringingly bad to fantastically good. Here are a few simple tips to help you prepare for and improve your pitch to potential investors.

1. Do your homework

It’s best to learn as much as you can about the VC before your pitch meeting. If you've done your homework — and I strongly suggest you do — you will have secured a warm introduction, evaluated the firm’s portfolio for stage and fit and generally determined whether your company is a good match for the fund. Don’t waste time qualifying a firm during the meeting. Do that ahead and of time and use the meeting properly — to tell your story.

2. Don't confuse courtesy with true interest

Regrettably, some VC funds will take meetings solely as a courtesy to a colleague or to learn more about a given space. On many occasions, I've spoken with entrepreneurs who thought they hit it out of the park only to learn the fund had no intention of investing. VCs are masters of the soft “no,” so you need to carefully read between the lines. View your first meetings as an opportunity to educate and excite the partner, and ideally secure a time for follow-up.

3. Don't ask for advice on strategy

Don't ask or expect a VC you're pitching to advise you on strategy or help flesh out your business plan. A pitch is not the right time or place for that. The main purpose of the meeting is for the VC to evaluate you and determine whether you have a well thought-out strategy and the ability to execute. Avoid open-ended questions such as, “Do you agree with our approach?” or, “What would you suggest we do?” Instead, speak confidently and showcase your strong perspective. This is not the time to be wishy-washy.

4. Drop the buzzwords

The tech scene today is brimming with buzzwords, and many entrepreneurs feel compelled to use what they may view as simply “industry terms” in their presentations. I've seen many a presentation rendered incomprehensible because it was chock-full of buzzwords: "Our (insert product or service) is highly disruptive and represents out-of-the-box thinking and a paradigm shift in the massively growing (insert sector) marketplace."

Lots of big words, but essentially meaningless. Cut out the jargon and explain what you do like you would to a friend who wasn't in the industry. One of my pet peeves is the standard presentation format used by most accelerators on demo day. They all look the same and lose the edges and originality that breathe life into a story. Tell your story simply, directly and with as few slides as possible. Make it personal. Most successful entrepreneurs are great storytellers. You have a story, so tell it.

5. Don't expect an immediate answer

One common mistake is for the entrepreneur to try to close too quickly.

In most cases, if the answer is no, VCs will quickly form an opinion, often in the first few critical minutes of the meeting. In this case, you can reasonably expect and deserve a quick response. (Keep in mind that VCs say “no” to 95% or more of the deals they see, and do so for many reasons both related and unrelated to your company.)

Getting to “yes” is more complicated.

It may require checking for conflicts; gaining partner support; defining the terms of the investment; consulting with trusted advisors; completing due diligence on you, the company and the market; and many other steps. Of course, like with a job offer, if you have other options in-hand, be upfront about it (but be careful not to overplay your hand).

Remember that a quick “no” is a healthy thing because it allows you to move onto the next opportunity. Don't be discouraged if it takes five, 10 or 25 introductions before you get a “yes” — this is perfectly normal. Remember all you need is one. If you really believe in your idea, don't be discouraged. Keep going.

Final Words

Most big ideas are not blindingly obvious at the beginning and can’t be neatly scripted to fit into a short elevator ride or an episode of Shark Tank. It may take time to develop your vision and convince an investor that you and your team are uniquely positioned to execute. As Sam Altman pointed out recently, “Great companies often look like bad ideas at the beginning.” Conversely, many of the “hot” investments that VCs clamor for a piece of don't end up panning out. In other words, just because VCs aren't lining up at your door now doesn't mean your idea isn’t good.

So if you are passionate about your company, it’s worth taking as many VC meetings as you need to take before someone “gets it.” If you use those meetings wisely and persevere even if you get a few “no’s” along the way, you'll be well on your way to success.

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Check point 5: Don't expect an immediate answer. Good information.

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The Secret Ingredient to Being a Great VC | OpenView Blog

The Secret Ingredient to Being a Great VC | OpenView Blog | Venture Capital Stories |
A lot of people want to know if there's a secret to being a great VC. I actually do believe there is a silver bullet, but it’s not based on educational background, work experience, or reading material. It’s something softer and more innate.

A lot of people ask me what it takes to be successful as a VC. I hear it from peers and from candidates interviewing to work at OpenView. People want to know the secret “pro tip” for aspiring or newly-minted VCs that will guarantee their success.

In today’s lifehack-glorifying world, it’s not surprising to me that people are looking a career Game Genie. Do I need an MBA? Do I need to be an “operator” first, by working at or founding a startup? Or do I need to be an investment banker first? What books should I read? What blogs should I read? Should I take a class on financial modeling? Do I need to learn to code? How should I manage my time as a VC analyst or associate? Is the secret being “first to arrive, last to leave” in my office?

While these are all good questions, I don’t see any of these things as the silver bullet. You could do all these things and not succeed. You could do none of these things and achieve wild success.

I actually do believe there is a silver bullet. It’s not based on educational background, work experience, or reading material. It’s something softer and more innate – I call it intellectual curiosity. It can be summed up in one word: “why”.

To me, “why” means “say more” or “help me understand.” It’s built on a foundation of healthy skepticism, cautious optimism, data-driven problem solving, and continuous improvement. Brad Feld calls people locked and loaded with this silver bullet “learning machines”.

The Secret Ingredient to Being a Great VC (or Entrepreneur): Intellectual Curiosity

Intellectual curiosity doesn’t accept things at face value. If someone boldly claims, “The rising craft coffee trend is going to kill Starbucks, and Blue Bottle is leading the pack,” the intellectually curious person doesn’t just say, “Oh cool. I like Blue Bottle. I read that article about them recently.” Their response instead looks more like a series of rapid-fire questions: Why is Starbucks so broken? What do players in the “craft coffee” set do differently compared to Starbucks? When and where did the craft coffee trend start? Who are the leading players today? Where are they from and what is each one known for? You like Blue Bottle — why is it objectively superior to Stumptown or Intelligentsia or Philz or La Colombe or the next upstart roaster/shop? Will anyone except urban hipsters ever care enough for this trend to go mainstream? And so on.

This kind of intellectually curious knee-jerk reaction can appear to border on incredulity, but really it’s just a passionate desire to gather, catalogue, and understand data and its relationship to other data. Reid Hoffman calls the strategy “follow up and probe” in his book, The Start-Up of You. He says that entrepreneurially-wired people (regardless of vocation) have a “mind on fire” that brims with curiosity.

How does this translate to being a VC? For starters, much of a VC’s time is spent meeting with people who all make big, hairy, heavily-biased claims. It is the VC’s job to discern between which claims are valid and which are bogus. Taking everyone at face value is recipe for disaster — competitors bash their rivals, startups minimize the threat of an incumbent, executives inflate their departments’ achievements, and customers can be over-eager early adopters on one hand or stubborn hold-outs on the other. You can’t trust anyone! Or at least you can’t give them the benefit of the doubt. You must ask “why” over and over until you have enough dots to connect.

I’m starting to think that maybe the best feeder program for VC may be the FBI or the CIA. Seriously. A good agent has to talk to everyone, turn over every stone, cultivate valuable but potentially resistant informants, connect previously unconnected dots, maintain a healthy skepticism, and ultimately put together a compelling & actionable case amid very high stakes.

Do you want to become a VC or are you looking for tips on how to succeed as a VC? Start asking “Why?” My colleague Baiyin Zhou wrote a great post with recommendations for folks trying to break into venture capital, which embodies intellectual curiosity. Or you could always join the FBI…

About the Author:

Blake Bartlett is a Vice President at OpenView. Prior to joining, he was a Vice President at Battery Ventures, where he focused on growth-stage software and Internet businesses.

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Wells Fargo Launches FinTech Accelerator |

Wells Fargo Launches FinTech Accelerator | | Venture Capital Stories |

Wells Fargo plans to invest in technology startups focused on payments, fraud and bank operations, and will run a boot camp for up to 20 startups this year. The accelerator program will offer both mentoring and equity investments ranging from $50,000 to $500,000, the bank announced on Wednesday (Aug. 20).

Startups can apply for the first semiannual boot camp until Oct. 1, 2014. Three startups were selected to be part of the program before the announcement was made: Zumigo, which uses location and mobile identity technologies to secure commerce and enable marketing; EyeVerify, which transforms a picture of a user’s eye into a security key; and Kasisto, which builds AI technology for intelligent conversation on mobile devices.

Up to 20 startups per year will be selected by a panel of Wells Fargo technology, venture banking and innovation executives, according to Finextra.

Wells Fargo follows Barclays and MasterCard in setting up its own accelerator program. Other banks, including Lloyds, have backed third-party efforts such as Startupbootcamp. The established financial services giants have been rushing to launch and back accelerators and incubators over the last year as they seek to co-opt the exploding community of fintech startups, Fintech reported.

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Opportunities galore for fintech start ups.

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Crowdfunding and Venture Funding: More Alike Than You Think

Crowdfunding and Venture Funding: More Alike Than You Think | Venture Capital Stories |

A recent academic study looked at theater projects on Kickstarter, including one titled “Thanks For Playing: The Game Show Show!,” found that projects picked only by crowds were as likely to deliver on budget — and achieve commercial success and positive critical acclaim — as projects favored by experts.

Hug wants to raise $34,000 to build an app and sensor band that wraps round your water bottle to track daily hydration. Van Eko is targeting €150,000 (about $200,000) for an eco-friendly electric scooter made of hemp fibers. PetTunes is seeking $196,000 to build a personal music player that optimizes sound frequency for dog and cat ears.

A catchy, even irrelevant idea is seemingly all an aspiring entrepreneur needs these days to raise money on crowdfunding sites like Kickstarter — a point driven home this summer when a Columbus, Ohio, developer, Zack Brown, raised $55,492 to make a potato salad.

Now, researchers are tapping into the growing data on crowdfunding to take stock of the phenomenon. A central question: Do crowds — driven by a herd mentality, crowd euphoria or sheer silliness — gravitate toward funding seemingly irrelevant ideas? Or can crowds make rational funding decisions and, better yet, exceed venture capital investors and other traditional gatekeepers in identifying promising projects?

A recent academic study explored those questions by looking at theater projects on Kickstarter. In that study, researchers tracked 120 theater-related campaigns on Kickstarter between May 2009 and June 2012 that aimed to raise at least $10,000. Researchers also asked 30 professionals, all with experience in evaluating applications for grant-making organizations like the National Endowment for the Arts, to evaluate those same campaigns.

Their findings: Crowds and experts agreed substantially on what makes promising theater. Where crowds and experts disagreed, crowds were generally more willing to fund projects. Yet projects picked only by the crowd were as likely to deliver on budget — and achieve commercial success and positive critical acclaim — as projects favored by experts. The crowd, in effect, picked strong projects that experts might not have recognized.

“The crowd is often thought as being crazy. There was a sense that they would back musicals about Internet cats, and experts would back serious work,” said Ethan R. Mollick an assistant professor of management at the University of Pennsylvania’s Wharton School. “It turns out the crowd does consider the quality of projects and outcomes pretty well.”

One reason crowds might do as well, or even better, at picking promising projects is that they tend to be more diverse and might avoid, for example, some of the gender biases that have long directed the bulk of the venture capital funding to male entrepreneurs.

Two recent studies of Kickstarter projects have found that crowndfunding is indeed opening entrepreneurship and investing to more women. A recent study of 16,000 Kickstarter projects, by researchers at the University of California, Berkeley and the Hebrew University of Jerusalem, found that female investors were more likely to invest in female entrepreneurs, and that these female entrepreneurs enjoyed higher rates of success in reaching their funding goals.

Another study by Jason Greenberg at New York University’s Stern School of Business and Mr. Mollick also found higher proportions of female funders led to higher success rates in capital-raising for women.

Venture capital investors are scrambling to tap the wisdom of the crowd, financing projects that found their first legs in crowdfunding. In the last quarter of 2013 alone, 10 previously crowdfunded hardware start-ups raised a total of over $150 million, according to a report published on Monday by CB Insights.

In March, Oculus VR, the virtual reality company that raised $2.4 million on Kickstarter, was acquired by Facebook for $2 billion. And with 19 deals through July, investor deal activity to crowdfunded hardware companies is on pace to break 2013’s record this year, the report said.

Crowdfunding platforms have become “a valuable source for dealflow” for venture capital investors, the report said.

Still, what explains the success of potato salad guy? Or projects like the first-ever all-pug production of Hamlet, successfully funded this month?

The Wharton School’s Mr. Mollick shrugs off those examples. “Sometimes, there’s just weirdness on the Internet. The Internet likes strange things.”

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VC investors choose cloud computing, mobile tech - CNET

VC investors choose cloud computing, mobile tech - CNET | Venture Capital Stories |
The annual Global Venture Capital Confidence survey shows investors are increasingly interested in throwing down money for technology companies.

Overall confidence in venture capital investing by sector. Deloitte/National Venture Capital Association

Venture capital investor confidence is on the up and up, and they're setting their sights on the tech world, according to a new survey by the National Venture Capital Association and Deloitte.

The two firms released the results of their annual Global Venture Capital Confidence survey on Wednesday, which shows that investors are increasingly being drawn to top categories in the tech industry, including cloud computing, mobile tech, and robotics.

"It's very positive results on the market overall, and very positive on tech," Jim Atwell, national managing partner for Deloitte's Emerging Growth Company, told CNET. "Tech companies are the sectors that have the most confidence the most excitement around them."

For the report, NVCA and Deloitte surveyed more than 300 venture capitalists from around the world in May and June of this year about their confidence on global investments and certain markets and industries. The survey shows that investor confidence has risen for the last three years in a row; the firms attribute this to favorable capital markets, many investment opportunities, and a strong investor climate.

The category that won the highest global investor confidence was cloud computing, which earned a 4.11 ranking on a scale of 1 to 5. Atwell said cloud computing appeals to investors because it requires less capital to build.

"It's the low cost of capital to build a product and the ability to license it over and over again," Atwell said. "It's a business model that's very attractive to the industry."

Following closely behind cloud computing was mobile technology with a 4.02 ranking; and third was health IT and services with a 3.94 ranking. Other high-ranking categories included enterprise software, consumer software, new media/social networking, and robotics. In fact, six of the top seven categories were in tech.

Some categories, like robotics, saw skyrocketing confidence. "Robotics have been around for a long time and here we go with a 14 percent increase in just one year," Atwell said.

Besides strong confidence in tech, investors also gave a thumbs up to the US. For the first time ever, a country has ranked higher than 4 on the 5-point scale. In the survey, the US rated 4.03 for the best country to invest in, second was Israel with 3.71, and third was Canada with 3.48. According to Thomson Reuters and NVCA, more funds were raised in the US in the second quarter of this year than any other quarter since 2007 -- the total was $7.4 billion in new commitments from 78 funds.

While there was high confidence in the US, VC investors' confidence in US government policymaking dropped, according to the survey. In fact, the US now rates as the lowest among countries surveyed this year for government policymaking. According to Atwell, low confidence in government policymaking centers on legal immigration reform, tax reform, and patent reform.

"The stalemate in Washington has brought the lowest confidence levels," Atwell said.

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Marketplace Startups Are Eating Entire Industries

Marc Andreessen famously said a few years ago that “software is eating the world.” While that very well may be true, it is now quite commonplace for marketplace companies to eat entire industries. What is a marketplace company? It’s a platform that connects buyers and sellers of a specific product or service. These companies tend to challenge the status quo of an industry, sometimes finding great success as well as controversy.

Take Airbnb for example. Before the advent of the short term stay Stalwart, limited options existed in the market for both buyers and sellers. If you traveled you had to stay at a hotel or call a friend. If you wanted to lease your place, you had to. Despite generating controversy over the years due to renter security and legal liabilities, Airbnb has created an entirely new market and is now challenging the entire hotel industry.

Marketplace companies have numerous unfair advantages. By directing existing market demand to new sources of supply, like individuals’ homes in the Airbnb example above, platforms undercut traditional incumbents in regards to pricing and unique experiences. Customers love them because often these services are on-demand and provide a delightful experience. Investors like them because they are easily scalable despite controversies and are asset-light businesses.

The category is growing. Marketplace startups are finding users and starting to attract investor attention. Bill Gurley from Benchmark said he likes the opportunity to appeal to millennials on mobile and Aileen Lee from Cowboy said she likes the social proof these marketplaces provide as an embedded network effect. Here are some of the more innovative “industry eaters” out there right now.


Founded by Adora and Aaron Cheung in 2012, Homejoy works to make cleaning services available to a broader audience. Through their quick and easy to use platform, a customer can hire a certified cleaner at an affordable price, providing the customer with more free time in their day and creating thousands of job opportunities for cleaners. Before Homejoy, one had to take the time to look for, interview, and hire a cleaner while paying a high cost for the service. Homejoy’s marketplace function displaces traditional home cleaning.

When it was founded in 2012, the company only served the San Francisco Bay Area. Today, it serves over 30 cities in the United States and Canada and continues to grow. Investors include Google GOOGL -0.91% Ventures and Y Combinator and the company has received about $40 Million in total investments. Customers rave about how easy it is to use the platform, the professionalism of the cleaners, and the low cost. “The price is really great compared to most of the services out there,” says Amanda Bloom a customer of the service in San Francisco. “And I love that I can take care of all of my appointment booking online.” It’s no wonder people are excited about this company’s future.


Launching out of Y Combinator, Traction makes it possible for companies to outsource their marketing team. This new marketplace connects brands and advertisers with media buyers, social media experts, content marketers, and bloggers who can run and execute digital marketing campaigns and distribute content. Founders hope to disrupt the traditional agency model by providing on-demand marketing services from some of the world’s best digital marketers.

Because of its function, Traction’s ability to gain, well, traction has been significant. Brands like Sony , Kraft, Danone and CBS have all signed up for it after just a few months of business.  This has allowed the company to grow at 80 percent month over month.

The current marketing landscape is full of inefficiencies,” says Traction CEO and Founder Ken Zi Wang. “By focusing on metrics only, we give brands a leg up.” Customers seem to agree. “I have worked with a good deal of startups including Y Combinator companies before but I have never seen a company as effective at acquiring fortune 100 companies as customers. This is clearly attributable to them solving a deep pain point in today’s marketing world,” said Lou Paik Marketing Manager for Danone.


San Francisco-based Instacart is a grocery delivery service that can deliver orders in as little as an hour. Founded in 2012, the company provides a platform through which customers can specify everything about their order, from where they want their groceries to be bought to how ripe they want their produce. Instacart then connects customers to shoppers who purchase and deliver the groceries. Their fastest delivery took only 12 minutes! The company is disrupting grocery stores’ home delivery service, which tends to be slower and less customizable, as you can’t get certain foods from certain stores.

Since 2012, the company has grown very fast and now serves 11 of the largest urban areas in the United States. The team plans to have that number up to 15 cities by the end of 2015. The company has raised approximately $55 Million from investors including Andreessen Horowitz, Khosla Ventures, and Y Combinator. These investments have come on top of huge growth in the company’s revenue, which has gone up 15x since September 2013. “The main reason I love Instacart is that it’s super convenient,” says Stacy Fried, a Boston customer. “The only grocery stores in our area that deliver are Whole Foods, Costco, and Safeway.”

Many marketplace companies are growing at a breakneck pace right now. The companies in this article are just a sample of what’s out there. Despite regulatory hurdles for some firms in the marketplace arena, it’s likely that more of these platforms will find success in the way of more users and investment. As technology progresses, we can expect more industries to be “eaten” by companies in this category.

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7 Steps for Impressing Venture Capitalists

7 Steps for Impressing Venture Capitalists | Venture Capital Stories |
Don't miss your opportunity to impress your next VC. Here are 7 simple ways to stand out from other startups.

I'm not trying to burst your bubble here, but you're not the only entrepreneur out there trying to secure funding. I get pitched by different entrepreneur three to five times a day. It gets old. Since there are plenty of venture capitalists out there that are in the same boat as I, you really have to stand out or we're going to pass you right over.

So how can you make yourself heard through all the noise? Here are seven things you need to have to impress me.

1. Have a Real Business in Place

Sounds obvious, right? But just because you have a so-called "million-dollar idea" doesn't mean that there's an actual business in there. A VC is going to be more interested in funding a company that actually has a functioning business in motion--and not something that's going to get acquired or flipped for a quick buck.

The best place to start is by creating a solid business plan that lays out what your business does, what the market's like, how the business is organized, and how much funding is required. Even if you don't use the same business plan when you go into your meeting, planning all of this out early allows you to fix any problems.

2. Start Networking

You've got your business plan in hand. Now what? Before you start cold-calling or emailing VCs, start networking and get an introduction prior to asking for money.

Start by identifying the VCs that you want to do business with. Once you've identified them, start getting in good with their contacts. If you could make a great impression on someone who influences them, then you're already in. Even if that doesn't happen, that start connecting with them on Twitter or LinkedIn. Also consider pulling resources like college professors, CEOs, or finance attorneys to get that all-important introduction.

Honestly, if someone comes to me without a connection to me... I'm not going to invest in them, period. You need to network like crazy.

3. Follow the 10/20/30 Rule of PowerPoint

This isn't exactly new--Guy Kawasaki wrote about this back in 2005, but it's still a useful tactic when trying to impress a VC. Basically, this rule states that your presentation should only be 10 slides, last no more than 20 minutes and use a font that is at least 30 points. The slides should cover the following:

  • Problem
  • Your solution
  • Business model
  • Underlying magic/technology
  • Marketing and sales
  • Competition
  • Team
  • Projections and milestones
  • Status and timeline
  • Summary and call to action

4. Be Compelling

There's no shame in being afraid of public speaking. We've all experienced that dread at some point, but don't let the fear and anxiety overtake you during your presentation. If you're passionate, sincere, and honest, VCs will see that. They'll notice that you're an individual who truly believes in what what you're selling. And that makes you compelling.

You don't have to do cartwheels or put on a song and dance. Be prepared. Practice. Smile. Look at your audience. And let the VC know how much this business means to you.

5. Prove That You've Done Your Homework

Pull out facts and figures that illustrate that there's an actual market for your idea. Mention the competition and what makes you different. Tell a great traction story to prove that your business can generate revenue. According to investor Brendan Baker, only 5 percent of pitches tell a great traction story. If you really want to stand out, be a part of that small minority.

6. Be Realistic

At the same time, be realistic. Don't try to be sneaky and trick investors with made-up or inflated numbers. Investors will see right through it. Provide and present accurate information in a plan that includes the most important drivers for revenue (amount of customers, selling price) and costs (sales and marketing expenses, costs of goods sold).

7. Don't Get Fooled

Investors aren't out to get you. When they ask you a trick question, they are intending to see how knowledgeable and motivated you are. One such trick question would be asking if they could hire a CEO at some point, or whether you see yourself as the long-term CEO. Don't get offended or beat around the bush. A response like "I want to build a great company and am willing to step aside" should impress them.

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Via TechinBiz, scott penton
Marc Kneepkens's insight:

This sums it all up. Get your business plan together and learn how to present it right. And don't come up with just an idea. Your plan must be more solid than that.

Marc Kneepkens's curator insight, August 11, 8:17 AM

First point: have a real business in place and come up with a business plan. Find more information on

Flexcel Network's curator insight, August 14, 3:56 PM

Sound advice for entrepreneurs - have a good business plan, know your market, present your case well and more.

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Google Ventures Enters European Venture Capital Market | L'Atelier: Disruptive innovation

Google Ventures Enters European Venture Capital Market | L'Atelier: Disruptive innovation | Venture Capital Stories |

The recently-announced advent of Google Ventures Europe is set to bring extra resources to the European innovation ecosystem but the firm will need to address the European market as a whole if it wants to make the most of the opportunities available.

The EY barometer reported that in 2013 venture capital investments in the United States amounted to $33 billion, compared with $7.4 billion in Europe. While this figure represented a 19% rise in the volume of European deals versus 2012, the ‘Old Continent’ is clearly lagging well behind. Now the recent announcement that Google Ventures, a venture capital firm belonging to Google which was launched in 2009, is coming to Europe and will open an office in London, could have a significant impact on the innovation ecosystem in Europe, but it remains to be seen whether the new entrant will be able to take advantage of opportunities across the continent.

New player in the European ecosystem

Bernard-Louis Roques, General Partner at Paris-based Truffle Capital, an independent European private equity firm originally set up to invest in spin-offs from companies active in, among other fields, the Information Technologies sector, believes that the arrival of Google Ventures Europe will have a positive impact since “there’s certainly a shortage of finance, so companies go and look for it abroad or sell off the business. It’s encouraging that Google thinks Europe has a strong role to play in the innovation ecosystem.” Google Ventures has no ambitions to come in and shake up the venture capital business in Europe, but intends to invest in companies that offer new innovation opportunities. In the company’s official Press Release, Google Ventures cites the examples of successful European startups such as SoundCloud, an online audio distribution platform based in Berlin, and digital music service Spotify, which demonstrate the ″enormous potential″ of Europe’s startup scene.  Meanwhile Roques sees Google’s strategy as “a way of having a presence in the native European ecosystem and being perceived as a local player.”

Only UK or the wider Europe to benefit?

Google Ventures Europe will begin with startup capital of $100 million, which seems rather a limited budget if Google is planning to seek investments across Europe as a whole. In fact Google Ventures is going to open its European office in East London close to the UK’s ‘Silicon Roundabout’. The Truffle Capital director points out that many US investment funds that are interested in Europe very often go to the UK, where there are both strong geographical links with the US and a highly favourable tax regime. As far as Bernard-Louis Roques is concerned it would not really make sense to set up an office in Paris as there would be no tax advantages. Nevertheless the fear must be that as Google Ventures Europe will be based in London, the company might neglect the rest of the continent.

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New Buying Strategy as Facebook and Google Transform Into Web Conglomerates

New Buying Strategy as Facebook and Google Transform Into Web Conglomerates | Venture Capital Stories |
A buying spree among technology companies has revolutionized the venture capital business model, Steven Davidoff Solomon writes in the Deal Professor.

Facebook, Google and other Internet titans have been busy transforming themselves into web conglomerates, making fortunes for the venture capital industry. But is it good for everyone else?

The stream of acquisitions has been head-shaking. Facebook acquired the social media companies WhatsApp for $16 billion and Instagram for $1 billion. Google acquired the thermostat and smoke alarm developer Nest for $3.24 billion and Waze, a social mapping start-up, for $1 billion, while Apple bought the music brand Beats Electronics for $3 billion.

The titans’ buying spree has not just minted more than a few 20-something millionaires; it has revolutionized the venture capital business model. Outside of the technology bubble, it used to be that someone struggled for years to build a company before it went public. Sure, some companies were sold when they were at an early stage with little, or even no, revenue, but that strategy reaped tens of millions of dollars, not billions.

The deep pockets and willing buyers among Google and the like have changed the venture capital strategy. Now, the idea is to move into a hot space — social media! — and develop a product that the web conglomerates will buy at prices never before seen in private deals.

The goal is no longer building a business but to be in the orbit of these tech giants. Or to put it another way, to win the lottery. The slowdown in recent months of the I.P.O. pipeline for Internet companies has only made this exit route more important.

You may be asking, so what? This may just be another bubble, and perhaps the bubble is deflating a bit.

Moreover, others, like the indomitable Marc Andreessen, are optimists and deny a bubble exists, citing the low price-to-earnings ratios of the big tech companies and the dearth of good companies to invest in as factors that are driving these prices. Even Mr. Andreessen, though, is critical of the “SF-centric consumer tech party scene.”

You can debate whether there is a bubble or a lasting trend, but there is no doubt about what is driving much of venture capital these days: the headlong rush by Google and other tech giants to become conglomerates.

This is a boon to the cozy, venture capital industry, which has willing buyers that they know well and have lots of cash.

The Internet giants, after all, have core products that mint billions of dollars, if not tens of billions of dollars a year. And that cash needs to go somewhere.

But cash is not the only factor driving the conglomerate wave. Fear is, too. The Internet giants do not want to face obsolescence because of new disruptive technology. So they are riding every hot technology wave. The competition to stay on top has led the tech conglomerates to drive valuations sky high as they battle for start-ups.

Nor do the conglomerates want to lose out to one another. Google, for instance, bought Waze not just because the company offers a potentially good product that Google can link to its own dominant map service, but possibly because its purchase keeps Waze out of the hands of its rival Facebook, which was also a rumored bidder.

New entrants like Alibaba — a Chinese conglomerate seeking to become an American one — are likely to make this competition even more fierce. Alibaba, for example, has spent millions of dollars this year investing in tech companies in the United States.

The Internet giants are not just conglomerates but also the largest venture capitalists on the block. Not only are they buying early-stage businesses to incubate and grow, they are starting their own businesses outside their original mission.

Google is the leader in the conglomerate move, researching blood monitoring for diabetes through contact lenses and investing in 23andMe, the gene analysis company. Google has also developed the product Google Glass for the (hopefully never coming) wearable computing trend. But others like Amazon are in multiple businesses, including cloud computing as well as television and even drones.

In other words, these tech companies keep expanding into new realms, far beyond their core businesses. If you ask them, this is not just a business strategy but grows out of their basic belief that they are incredibly smart and can solve the problems of the world while also delivering products. Not only that, these higher goals justify the incredibly shareholder-unfriendly governance structures of Google and Facebook, which concentrate control with the founders.

The idea that smart people can solve all the world’s problems or at least provide an online friend is a noble one, though, somewhat worthy of an episode of “Silicon Valley,” the satire of the technology culture on HBO.

The paradox is that conglomerates outside the tech sector are an endangered species. The 1960s was the age of the conglomerates. ITT, for example, made both weapons and movies, with the idea that smart managers could operate any business and different operations would diversify the business. But that strategy did not work out as planned. The problem was that managers needed to focus on their businesses. If investors wanted to diversify, they could do so by simply investing in the separate companies. And splitting off businesses would discipline managers not to waste extra cash.

The trend against conglomerates has gotten so intense that hedge funds seek not only to split companies with different business but different types of businesses in the same industries. Darden Restaurants, for instance, has been fighting an activist campaign that it split off Olive Garden and Red Lobster from its higher performing restaurants. Darden responded by first trying to spin off Red Lobster then selling it.

Will that same sensibility eventually catch up to the new web conglomerates? Are they simply management’s larks, with the huge profits of the core businesses allowing the other cash-wasting enterprises? Or is it really true that smart people can do everything and that the conglomerates can replicate the venture capital structure? Perhaps these conglomerates are all about taking control of the web and making sure that no new big competitors spring up.

So far, the success of these purchases is uncertain. Google’s purchase of YouTube, for example, and Facebook’s purchase of Instagram seem to have been nicely timed. But Microsoft’s purchase of Nokia and Google’s acquisition of Motorola Mobile? Maybe not so much. And then, there are the ancient failures, like Yahoo’s purchase of GeoCities and in 1999. We will see whether the $16 billion for WhatsApp or the money spent developing Google Glass was worth it.

But perhaps the new conglomerates are no better than the old ones. That’s a question consumers and investors — as well as the companies themselves — may want to ask.

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The tech giants are changing the world of venture capital and M&A

AleksBlumentals's curator insight, August 9, 3:48 AM

I look at the start-up ecosystem as experiments to discover higher order solutions. from this perspective it makes all the sense in the world that the larger companies foster the experiments and buy units that promise success. 

The work to understand the patterns and possibilities applied to high impact problems like energy, water and health is just beginning. Yet this is the ultimate challenge, to take what the huge Web/app laboratory of collaboration has taught us and apply it to the wicked problems.

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The First Trillion-Dollar Startup | TechCrunch

The First Trillion-Dollar Startup | TechCrunch | Venture Capital Stories |
In 1957, eight entrepreneurs decided to do something that seemed crazy. They launched a new tech company called Fairchild Semiconductor in a small town south..

Editor’s note: Rhett Morris is the director of Endeavor Insight, the research arm of Endeavor, a nonprofit that supports more than 900 entrepreneurs in 20 countries. He edits a blog and monthly newsletter on entrepreneurship ecosystems here.

In 1957, eight entrepreneurs decided to do something that seemed crazy. They launched a new tech company called Fairchild Semiconductor in a small town south of San Francisco. The entrepreneurs had a difficult start, but Fairchild eventually became the first major computer chip company in the region.

Although many people are familiar with Fairchild’s success, few know the full extent of its impact. During the last year, our team at Endeavor Insight has traced the story of Fairchild and gathered intriguing new data. We uncovered something that was quite surprising: if the value Fairchild created is measured in today’s dollars, we believe the firm would qualify as the first trillion dollar startup in the world.

Fairchild’s Launch and Early Success 

The achievements of Fairchild’s co-founders are even more impressive when you consider where they occurred. The San Francisco Bay Area is now a thriving tech hub, but it was a very different place in the mid-1950s. At that time, there were no venture capital investors in the region. Stanford University did not produce any of the major research on computer chip components and immigrants made up only a small percentage of the population.

As the chart below illustrates, the San Francisco area was far behind other U.S. cities in the development of the transistor companies that made up the early computer chip industry. No one expected the region to become a hub for these technology businesses.

Seven of the eight co-founders of Fairchild had recently moved to the San Francisco area from cities with more established transistor firms and investors. Three of these entrepreneurs – Jay Last, Bob Noyce, and Sheldon Roberts – had earned PhDs from MIT in Boston. Eugene Kleiner and Julius Blank were engineers in New York City, and Jean Hoerni and Gordon Moore had worked at Caltech near Los Angeles. (The final co-founder, Victor Grinich, was a former researcher and PhD student at Stanford.)

They leveraged their professional networks in these cities to find two key supporters who helped them raise capital and sign contracts with their first customer. These connections set them on the path to success. After just three years, Fairchild’s annual revenues were over $20 million. By the mid-1960s, the group had invented a new product, the integrated circuit, and was generating $90 million in annual sales. Yet, this was only the beginning of the co-founders’ accomplishments.

The Fairchild Valley 

As Fairchild started to grow, employees began to leave the firm to launch new spin-off businesses. Many of these firms also grew quickly, inspiring other employees still working at the company.

“You got these guys leaving and starting companies and the companies are running, working,” a former manager recalled. “You get a look around and look in the mirror and say, ‘Well, you know, how about you? What are you going to do?’”

The eight co-founders supported a number of these new businesses. Kleiner encouraged an employee to start a company that made the glass components Fairchild used in its manufacturing process. Noyce served on the board of Applied Materials, a local electronics equipment manufacturer, and mentored the company’s young founder.

It wasn’t long before the entrepreneurs at Fairchild began to create their own spin-off firms. “That experience of starting this company and watching it grow – I thought I’d like to do that again,” recalled Last. In 1961, he partnered with three of his Fairchild co-founders to create Amelco, a new business that produced specialized devices. Two other co-founders, Moore and Noyce, left Fairchild several years later to start the computer chip firm Intel.

The eight co-founders also reinvested their capital into a number of new local startups. In 1961, four of them helped to fund the Bay Area’s first venture capital firm. Another founder provided the financing that helped a former employee launch AMD. When Moore and Noyce launched Intel, the other six co-founders helped to fund the new business.

The growth of these new companies started to reshape the region. In just 12 years, the co-founders and former employees of Fairchild generated more than 30 spin-off companies and funded many more. By 1970, chip businesses in the San Francisco area employed a total of 12,000 people.

“That’s part of the legacy of Fairchild that maybe doesn’t get the attention it should,” Moore has said. “Every time we came up with a new idea, we spawned two or three companies trying to exploit it.”

The achievements of these companies eventually attracted attention. In 1971, a journalist named Don Hoefler wrote an article about the success of computer chip companies in the Bay Area. The firms he profiled all produced chips using silicon and were located in a large valley south of San Francisco. Hoefler put these two facts together to create a new name for the region: Silicon Valley.

Hoefler’s article and the name he coined have become quite famous, but there’s a critical part of his analysis that is often overlooked: Almost all of the silicon chip companies he profiled can be traced back to Fairchild and its co-founders.

Adding Up Fairchild’s Impact

Fairchild’s success continued to fuel the growth of companies in the Valley in the years after Hoefler’s article was published. When Steve Jobs was starting his career in the 1970s, he often rode his motorcycle to Noyce’s house and spent hours listening to the older entrepreneur’s advice. According to Noyce’s wife, Jobs also had a unique habit of calling their home around midnight. The first investor in Apple was also a former Fairchild employee.

The 92 public companies that can be traced back to Fairchild are now worth about $2.1 trillion, which is more than the annual GDP of Canada, India, or Spain.

In 1972, Kleiner co-founded the venture firm Kleiner Perkins, which has gone on to invest in hundreds of companies, including Google and Symantec. While Kleiner was starting Kleiner Perkins, a former Fairchild executive named Don Valentine was launching another venture firm called Sequoia Capital, which has also invested in several hundred companies, such as Cisco and LinkedIn.

Many of the companies funded by these two firms were led by entrepreneurs and executives who have gone on to become important investors. Companies like Sun Microsystems, Netscape, and PayPal spawned investment firms such as Khosla Ventures, Andreessen Horowitz, Founder Collective, and 500 Startups.

Our team at Endeavor Insight recently worked to quantify the impact of Fairchild Semiconductor and its co-founders. We identified over 130 Bay Area tech companies that were trading on the NASDAQ or the New York Stock Exchange. Our analysis indicates that about 70 percent of these firms can be traced directly back to the founders and employees of Fairchild.

The total impact of these businesses is staggering. The 92 public companies that can be traced back to Fairchild are now worth about $2.1 trillion, which is more than the annual GDP of Canada, India, or Spain. These companies also employ over 800,000 people.

If we look beyond the publicly traded businesses listed above, Fairchild’s impact is even greater. In total, we can trace over 2,000 companies back to the firm’s eight co-founders. This includes companies such as Instagram, Palantir, Pixar, Nest, WhatsApp, Yammer and YouTube.

The story of Fairchild illustrates how entrepreneurs can reshape their local communities. When successful founders generate new spin-off companies, mentor others and act as early-stage investors it increases the opportunities available to new generations of entrepreneurs. The intellectual, social, and financial capital that successful founders reinvest into new companies strengthens the local entrepreneurship community and enables successful hubs, like the original Silicon Valley, to develop.

Fairchild trades on the NASDAQ with a market capitalization of around $2 billion. However, the full value of the company can only be measured by tracing the way the firm’s success has been reinvested into new founders and companies. By this measure, Fairchild is the Valley’s first trillion-dollar startup. It might even be the most important entrepreneurial company of the last hundred years.

This post has been condensed and excerpted from a new report by Endeavor Insight that was created through the support of Omidyar Network. For more detailed information on the growth of Fairchild Semiconductor and the impact of its founders, you can download the full report entitled “How Did Silicon Valley Become Silicon Valley?” here.

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One venture can make a huge impact on the world. This is just one example. Metrics can not show the impact of such events.

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Rand Capital’s investments grew 2 percent in second quarter - The Buffalo News or How to be part of VC funding

Rand Capital’s investments grew 2 percent in second quarter  - The Buffalo News or How to be part of VC funding | Venture Capital Stories |

The value of Rand Capital Corp.’s investments grew by 2 percent during the second quarter as the Buffalo venture capital firm made new investments totalling $4 million in seven companies.Rand executives said the second quarter was one of the busiest they can remember for new investments... - The Buffalo News

“Having completed seven investments for $4 million-plus in a quarter is a lot of investment activity for any fund,” said Daniel Penberthy, Rand’s executive vice president.

Rand had the cash to invest, in part, because of its successful investment in Buffalo-based health exchange operator Liazon, which was acquired last year by consulting firm Towers Watson. That deal yielded Rand a $6 million profit on its $1 million investment and left the venture capital firm with more than $7 million in cash.

The flurry of spring investments cut Rand’s cash stash almost in half, to $4 million. Those investments included previously announced deals that pumped $1.25 million into call center operator Teleservices Solutions Holdings and $600,000 into Buffalo molecular diagnostics company Empire Genomics.

Rand also made five deals that involved pumping additional money into companies where it already held an ownership stake. Those included:

• $750,000 in SocialFlow Inc., a New York City company that monitors activity on social networks to help users determine the best time to advertise or publish content.

• $500,000 in SciAps, a Woburn, Mass., company that makes hand-held analytical instruments used in field testing.

• $479,200 in Knoa Software, a New York City software firm as part of a new round of fundraising that brought in $5.1 million. At the same time Rand was pumping more money into the company, it wrote down the value of its investment by 29 percent.

• $350,000 in, a Saratoga Springs company that makes human resources software.

• $150,000 in Mercantile Adjustment Bureau, a Williamsville collections agency.

Overall, the value of Rand’s investments grew to $28.4 million, or $4.43 per share, at the end of June, up from $27.9 million, or $4.35 per share, at the end of March.

Part of the increase came from a $1.2 million rise in the valuation of Binoptics, an Ithaca company that makes optoelectronic components that are used by transceiver and transponder manufacturers. Binoptics sales and profits have hit record highs in recent quarters, said Pete Grum, Rand’s president.

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The four delusions that cost VCs money

The four delusions that cost VCs money | Venture Capital Stories |

“Why would I ever pay $250 for a shirt?” A highly-respected fellow VC asked me this rhetorical question soon after my firm invested in Trunk Club’s Series A round and I joined the company’s board of directors.

In the three years since, Trunk Club CEO Brian Spaly and his team built Trunk Club into a category-defining brand and business in “assisted commerce” for men’s apparel. It recently was announced that Nordstrom has acquired Trunk Club, enhancing Nordstrom’s core business with Trunk Club’s stylist-based personalized service that combines online and high-touch commerce.

The “$250 shirt” conversation has come to mind many times over the course of my involvement in Trunk Club as an investor and board member. VC investing starts with an entrepreneur who is expert in their field and who knows their business opportunity better than anyone. As a VC, you do your homework, and try to subordinate any preconceived notions you have. If the due diligence convinces you that product or service is innovative, the market is large, and the team can execute, you’ve got a good candidate for investment. Not that complicated, in theory.

But so often, the preconceived notions get in the way. It’s all too easy to stay in the “comfort zone” and dismiss an entrepreneur who could turn out be the next Brian Spaly. Here are four “comfort” traps I try to avoid:

1.) “I wouldn’t use it.”

I think it’s a stretch to assume one’s own personal preferences are a proxy for the behavior of a large population of target customers. It turns out one individual’s willingness to pay for a snappy shirt and unparalleled convenience can vary quite a bit. What we learned quickly at Trunk Club was that for every guy with disposable income who is satisfied with his wardrobe, there are many more who are looking for a convenient way to raise their sartorial game and play for the win in that next career move or relationship. It’s comfortable to rely on personal opinion, but the real money is in predicting—without the comfort of certainty—how thousands or millions of potential customers will behave when offered the opportunity to purchase a new product or service. It’s not necessarily about you!

2.) “I’m just not sure what kind of business this is.”

I call this one the “Categorization Trap”. It feels good when a business fits neatly into a well-defined category that already features numerous successful companies, because this validates the market and business model. Unfortunately, this may or may not indicate a good business opportunity—sometimes ease of categorization also means the opportunity is incremental, or the competitive landscape is crowded. Was there an “on-demand mobile-dispatched personal transportation” category when Uber was an early-stage company? No, but I’ll bet Benchmark and Chris Sacca and other early Uber backers are glad they didn’t let that fact deter them. At Trunk Club we found that investors frequently asked, “is this an e-commerce company or a brick and mortar retail company?” In truth, Trunk Club didn’t conform to either model. The model itself—“assisted commerce” combining a hyper-efficient inside sales model with physical locations not just for sales but also for product curation, training, and a unique brand experience—was an innovation. The same differentiation that made Trunk Club’s model “uncomfortable” for some investors made the service uniquely appealing to Trunk Club’s clients and hard for competitors to replicate, and ultimately made the company valuable. There’s comfort in knowing a business looks a lot like another successful company, but if you make familiarity a requirement, you’ll miss some good opportunities.

3.) “There’s no technical barrier to entry.”

Investors often seek the comfort of knowing a startup’s technology can’t easily be replicated. It’s understandable, but my experience has convinced me that there are plentiful examples of very successful startups that had solid tech underpinnings but no actual core tech IP that couldn’t be replicated. GoPro, now a $5B market cap public company, created a huge market for its wearable/mountable HD camera despite not having any fundamental technology advantage over many more established consumer electronics giants. GoPro won for other reasons. Nick Woodman envisioned that the real untapped market was not for cameras, but for capturing and sharing experiences. There also was rapid product innovation, the network effects of the proliferation of GoPro-captured video content, brilliant marketing, and solid execution. At Trunk Club, the company quietly built solid technology under the hood to enable it to service its customers – from order fulfillment on the backend to mobile apps for stylists and customers. The technology enabled Trunk Club to execute on the unique elements of its service. So while there was not technical barrier to entry when we invested, it didn’t matter.

4.) “That’s not where the market is going.”

I call this one the “hubris trap”. It certainly is important to form a well-educated point of view on market opportunity, but if you don’t stay open-minded you’re going to miss some good investments. A friend from another VC firm recently told me an entertaining (and tragic) story about his partners’ reaction when he tried—unsuccessfully—to get his firm interested in chasing Facebook for an investment in 2004. One of his partners told him, “Don’t waste your time. Social networking is dead. Look at Friendster!” I had my own experience with this when I landed my job at USVP in 2004 and a friend at another VC firm told me, “I feel bad for you, being a software guy in VC – software has been done. It’s over”. Of course, since then, we’ve seen a bumper crop of venture-backed software companies worth over $1B, such as Castlight Health, Marketo, Veeva, Workday, Yammer, Zendesk, and many others. Trunk Club, too, had its naysayers, those who thought the world is going exclusively online, period. So often, it seems, the consensus view of where a market is going turns out to be inaccurate, or at least incomplete.

I think investors can do well avoiding these traps, and likewise, entrepreneurs should seek the open-minded investor and avoid being forced to conform to someone else’s framework for their business. The best entrepreneurs often will push investors outside our comfort zones. I love it when a compelling entrepreneur takes me outside my comfort zone, like Brian Spaly of Trunk Club did… because if an investment opportunity makes it through all of the “comfort traps” and easy outs, it might be something very special—and you might be one of a few who recognizes it.

(Editor’s note: This is a guest post by Rick Lewis, General Partner at USVP. The post went through Pan

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Is Your Equity Crowdfunding Project Investment Ready? - CrowdClan

Is Your Equity Crowdfunding Project Investment Ready? - CrowdClan | Venture Capital Stories |

Many equity crowdfunding projects are not yet ripe enough for the responsibilities that ensue a funding round.

Just because an entrepreneur can create an equity listing, does not mean that he or she should. In fact, many equity crowdfunding projects are not yet ripe enough for the responsibilities that ensue a funding round. To assess if your crowdfunding project is investment ready, explore the key steps below:

Register your Businesses

A business cannot issue shares unless properly registered. Following registration, consider trademarking the name and purchasing its domain online. Since crowdfunding does take place virtually, perhaps you should investigate the domain before registration. Lastly, open a business bank account. Note that you may need more than one account if your chosen portal hosts limited transaction tools.

Forecast the Financials

A properly valuated business should offer investors a minimum of three years’ financial projections, including profit and loss, cash flow and balance sheet forecasts. Such financials must be detailed and robust. They should accurately profile the business’ financial standings and trajectory so that investors can understand the model and proposal.

Create a Business Plan

In previous articles, we’ve covered this topic extensively: “Why Business Plans Are Invaluable to Crowdfunding Campaigns,” “Business Plan Mistakes Equity Campaigns Should Avoid” and “Business Model Canvas: A Great Way to Plan Your Campaign.”

Draft a Shareholder’s Agreement

Although many equity portals supply this document, some lawyers advise businesses to write their own. A comprehensive shareholder’s agreement should include a bevy of responsibilities and expectations such as vesting provisions, repurchasing/trading restrictions, handling disputes and operating guidelines (i.e. procedural and observer rights). Research shareholder’s agreement templates and practices, consulting expert whenever necessary.

Gather Your Crowdfunding Materials

Crowdfunders can find a wealth of information on our website pertaining to campaign setup and management. Alternatively, download our crowdfunding e-book, “Get Funded: Crowdfunding Strategies for Entrepreneurs, Innovators and Self-Starters.”

Apply for Tax Relief

Investors see tax relief as incentive, meaning it’s a factor that determines if an equity project is investment ready. Unlike registration, however, it takes time to process. Ensure that you have applied for tax relief before your first funding round. Again, tax relief differs country-to-country, so conduct research before submitting your forms.

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More funds for PH startups

More funds for PH startups | Venture Capital Stories |

MORE funds will pour in for Philippine startups this year as one investor group from Silicon Valley has announced that it will be investing in five to 10 startups from the Philippines each year.

500 Startups founder Dave McClure said in a press conference during the second Geeks on a Beach held in Cebu last week that the company will be allocating $100,000 or more than P4 million for each startup. The investment will come from the $15 million worth Southeast Asian Fund of the company, which is good for two to three years.

“We are definitely interested in the Philippine market (…) I guess (we will have) five to 10 investments a year in the local market (Philippines). We are also looking at Indonesia, Thailand, Singapore, and Malaysia,” McClure said.

500 Startups has already invested in 800 startups in the past four years, 200 of them come from outside the United States.

McClure expressed interest in the Philippines as an investment haven, adding that he also wants Filipino startups to grow and make it global.

Not much competition

“The opportunity to open business in the Philippines is probably better than other places in the world because there isn’t much competition going on and the market is growing faster than it is in other places. This is one of the best places in the world to be investing in. The undiscovered talent here is probably as good as any other place. The only challenge is that the investors don’t probably believe that.

The investors probably look at the US market saying where is the next Mark Zuckerberg?” he said.

McClure pointed out that the Philippines has already established an ecosystem for startups but it is still in the “early” stages, basing his assessment on three factors: market, capital access, and level of talent and entrepreneurship.

He said general market conditions “look good” with a hundred million population accompanied by a growing smart phone adoption and Internet penetration.

On capital access and availability, IdeaSpace Foundation Inc founder Earl Valencia said there has been a heightened interest among local and regional investors to help Filipino startups grow and expand. McClure added that the government can help increase capital availability for startups through subsidies or tax incentives.

In the United States alone, venture capitalists are attracted to fund startups, said McClure, saying that US investors envision the latter to grow their investments in multiple folds.

“For small percentage of startups, the returns are tremendous,” he said.

However, he said investing in startups is also risky because roughly 70 to 80 percent of them won’t bring returns, 20 to 30 percent of them would bring enough returns, while only one to 10 percent of them bring “substantial” returns, amounting to 10, 20, or 50 times the amount invested.

For 500 Startups, McClure said only 10 to 20 percent of their startups brought significant returns.

Investment factors

In investing in startups McClure said the company looks into several factors like their functionality and profitability.

“Typical scenario for us is that we look at companies that have functional products in the market that are generating anywhere from maybe $5,000 to $25,000 a month (and) have some reasonable economics that we think will eventually be profitable. (…) And usually we will be investing a hundred thousand dollars and then look into helping them raise a million,” he said.

Startups, according to the Silicon Valley investor, have a competitive advantage over existing businesses, citing the latter as not aggressive as startups in looking for new markets.

“Startups acquire more customers faster and cheaper…The ability to acquire customer online is the significant change happening over the past five to 10 years.”

Valencia calls on to Filipino startups to create relevant businesses that address problems by using technology.

“(I hope there’s) no more waiting (attitude). Just do it now so that we get this ecosystem fuelled,” Valencia said.

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Good news for the Philippines and Asian region.

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Will Developer Tools Startups Ever Find Investors? | TechCrunch

Will Developer Tools Startups Ever Find Investors? | TechCrunch | Venture Capital Stories |

Venture capital is an industry in which the exceptions are often more important than the rules. For many years, investors believed in a golden rule that software was the key to minting returns, leaving hardware as one of the most underinvested areas of venture. Then things changed as new technologies like 3D printing allowed hardware startups to accelerate their product design, and several large exits like Nest Labs, Dropcam, and GoPro encouraged investors to take a new look into the sector.

So I was deeply interested in our story yesterday that the development platform Xamarin raised $54 million in a series C investment from Insight Venture Partners, among others. Like hardware, developer tools has traditionally been a sector that received very little attention from venture capitalists. The reasons have remained persistent: the market isn’t very large, preventing huge scale; there are only a handful of potential buyers, leading to small exits; and most venture capitalists don’t understand the needs of developers in the first place to even make an informed investment.

Just take some of the notable recent exits from the space. Parse, a popular backend for scaling mobile applications, was purchased by Facebook for north of $85 million after $7 million in venture capital investments. Crashlytics, which tracks crashes on mobile apps, was acquired by Twitter for a reported $100 million just shy of the company’s two-year anniversary. More notably, Flurry, a mobile analytics service and ad network founded in 2005, was sold last month to Yahoo for more than $200 million.

Such exits are certainly not abject failures, but they are also not the kind of outcomes that venture capitalists are hoping for when they invest. Given those sorts of exits, investment in the space has been mostly limited to seed and series A investments, according to CB Insights, which ran an analysis of the market for developer tools investments last year. Those sorts of investments can still provide a decent multiple on investment on exits in the low nine-digits.

There have been, of course, some notable growth-stage exceptions for developer tools, most prominently Andreessen Horowitz’s $100 million investment in GitHub, and several large secondary (non-equity) investments into Atlassian. But the lack of growth capital in this sector is clear. In fact, if Xamarin’s series C deal had happened last year, it would have been the largest investment at its stage.

It’s hard to glean from one investment whether the calculus for investing in developer tools is shifting. But looking at the challenges that the sector has traditionally faced, there may be changes in the market that will allow devtools startups to be a more exciting focus of investments in the coming years.

The most obvious change is the opening of developer platforms. For years, large companies like Microsoft carefully controlled access to their developer technologies. Microsoft built its own IDE, Visual Studio, and carefully orchestrated its products together in ways that made it difficult for startups to gain significant market share. Startups were always facing the possibility of extinction with a single policy change, limiting their value to both investors and potential buyers.

Now, openness is the watchword of the industry today. Google’s Android ecosystem remains fundamentally open, and many developer products have been created targeting that operating system. Xamarin itself is the embodiment of Microsoft’s change in stance on its developer technologies like C#, which it now sees as a potential opportunity to get its language and libraries used across all mobile operating systems.

Interestingly, the only exception to this trend happens to be Apple, which has kept its developer ecosystem almost as closed as the iPhone walled garden itself. The main IDE for iOS apps remains Apple’s XCode, which is the only way today to compile apps and deploy them to iPhone. But even here, there might be changes, with the company appearing to show a willingness to be more open if its comments at this year’s WWDC conference are any indication.

Openness is providing more opportunities for startups to build original toolsets, but the real potential for scale is coming from the growing size of the developer workforce itself. The U.S. government predicts that the workforce will grow 22% over the next ten years, and many in Silicon Valley would argue that such an estimate is quite conservative.

Due to the growing clout of developers, there are now dozens of startups offering developer-focused services such as continuous integration, real-time database engines, social coding, and error management. Even products not traditionally considered devtools are putting more emphasis on developers. The payments service Stripe, for instance, is unabashedly focused on developers as the acquisition model for new customers.

Ultimately, more customers means more revenues and greater potential for building sustainable companies. Perhaps no company embodies this trend as well as Atlassian, which had revenues of $150 million in fiscal year 2013 and was recently valued at $3.3 billion by investors.

While the terrain may be shifting to allow for more highly-scaled devtools startups, Atlassian is also a case study of the challenges that such startups face in growing. The company is hardly a single product company, offering solutions for everything from hosting code in the cloud to handling coding workflows, and it has never taken equity financing. That bootstrap approach is similar to GitHub, which waited four years before its first (massive) infusion of cash.

Ultimately, the real change going on is the ability of venture capitalists to provide enough capital to allow these companies to bootstrap their way to profitability. Devtools are never going to grow like consumer startups, and so a different model and tenor of investing may be the order of the day. If venture capitalists can be flexible in how they think about these sorts of startups, there may be tidy returns ready for the taking.

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The 12 Luckiest Startups In Boston

The 12 Luckiest Startups In Boston | Venture Capital Stories |

A handful of aspiring entrepreneurs just got lucky in Boston.

Ah, the relentless cadence of Techstars. All over the world, every year, from London to Seattle, its waves of ambitious startups and inventors seem to rise and surge with the inevitably of the tides. Its entrepreneurs march in step through its bootcamps to the rhythm of the seasons.

It’s an exclusive club – only about 1% of startups that apply wind up making it into the program – and over 90% that complete its courses prove their powers by surviving. The payout is mouthwatering for young firms: $118,000 in seed funding, intensive mentorship, and access to a network of mentors and program alumni. The payment is a 7-10% chunk of equity in the company. After 90 days with Techstars, the organization claims, companies average over $2 million in follow-on investment

Techstars Boston just announced its fall roster of lucky teams, and a few of them don’t even call Beantown home. Several of the most recent class hail from overseas, namely Australia, Holland, Croatia, France, Russia, as well as the United States. This is the first go-round for new managing director Semyon Dukach , a successful and relentless entrepreneur and the focus of a recent FORBES profile, looking back on his time as an MIT math wiz, a blackjack card-counter, founder of multiple businesses and his evolution as angel investor.

Here’s a list of the startup teams that will be working their tails off along the Charles this fall, toiling to make their entrepreneurial dreams come true–be they world domination or a quick strategic sale.

Techstars Boston Fall 2014 class:

  • Codeanywhere is a cloud based code-editor, development, and collaboration platform.
  • CoolChip designs next-generation kinetic coolers for electronics enabling quieter, smaller and cooler product experiences.
  • EdTrips makes field trips easy and drives more visitors to educational destinations by consolidating the booking and payment of trips among multiple locations and services.
  • Fairwaves develops disruptive open-source mobile network equipment and software to bring cell phone service to the next billion people.
  • Headtalk’s platform enables a new kind of nonverbal communication with wearable devices.
  • Helloblock‘s  API simplifies accepting online payments through Bitcoin.
  • indico is building the world’s first IDE for machine learning.
  • ROCKI is creating the standard for listening to the music you love on the speakers you already have.
  • Spitfire Athlete is building a brand that stands for strength and badassery among women, starting with a fitness app.
  • Streamroot cuts bandwidth costs for online broadcasters with native peer-to-peer video streaming technology.
  • Splashscore’s influencer activation engine helps large consumer brands find and activate their most influential customers on social networks to drive more clicks, likes, leads, and sales.

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Good startups get more chances than ever.

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Security App Lookout Attracts $150 Million in Venture Capital

Security App Lookout Attracts $150 Million in Venture Capital | Venture Capital Stories |

Lookout, a seven-year-old mobile security company in San Francisco, is riding a wave of concern over cyberthreats, with 50 million people using its security app.

Now, the company has raised a fresh haul of venture capital from some major financial firms.

Lookout announced on Wednesday that it had attracted $150 million from investors led by T. Rowe Price Associates. Other investors include Goldman Sachs, Morgan Stanley Investment Management, the Wellington Management Company and Bezos Expeditions, the personal investment fund of Jeffrey P. Bezos of Amazon.

A number of previous investors in the company – including the venture capital firms Andreessen Horowitz, Accel Partners, Khosla Ventures, Index Ventures and Mithril Capital Management, which was founded by Peter Thiel – also participated.

The presence of T. Rowe Price and Morgan Stanley Investment Management, two firms that serve wealthy individuals, could indicate that Lookout is at a mature stage. Young technology companies, when they are gearing up for an initial public offering, like to accept investments from such firms because they are seen as long-term investors that will not immediately sell shares in an I.P.O.

“These are very long-term, patient investors who are here to help us in building a multidecade franchise,” said John Hering, the co-founder and executive chairman of Lookout, who until recently was the chief executive.

Lookout hired its current chief executive, Jim Dolce, in March. Mr. Dolce, a Silicon Valley veteran, previously founded four technology companies, including one that was acquired by Juniper Networks and another that was bought by Akamai Technologies.

Mr. Dolce said that while Lookout had made inroads with individuals and some small businesses, he now hoped to convince large companies to sign up and put their employees on the service, especially given that more companies allow employees to use their own mobile devices for business.

The new capital will help the company develop new products and expand its sales team, as it tries to crack the large business market, Mr. Dolce said.

“This financing, especially given its size, is a testament to what we’re doing here,” he said.

For venture capitalists, Lookout has several promising sectors of growth. Its software is delivered over the cloud on a subscription basis, providing a predictable stream of revenue. It is also focused on mobile devices, which many technology experts see as the future of computing.

Most important, it appeals to consumers and companies worried about malware, viruses and other threats. The app says it can block malicious websites as well as check which other apps are using a consumer’s private information. And it includes a service to help consumers recover a lost or stolen phone.

In the United States, Lookout has partnered with AT&T, T-Mobile and Sprint, which offer the service to their customers. It also works with major mobile companies in Germany, France and Britain.

With the latest financing, Lookout has raised a combined $280 million. Allen & Company was the adviser on the latest financing round.

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Security problems are huge, the money invested proves that.

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Silicon Valley has evolved -- it’s not about startups anymore

Silicon Valley has evolved -- it’s not about startups anymore | Venture Capital Stories |

The Valley is no longer about startups; it's about scale-ups.

You may have heard some parts of this story already: the part about how starting up a company is easier than it’s ever been; the part that says capital nowadays is commoditized; and the part about costs being at an all time low. You’ve also probably already heard about how this macro-trend is resulting in the highest number of people ever leaving their corporate jobs, and that it’s fueling the birth of incubators and accelerators everywhere, with numerous cities positioning themselves as the “next” Silicon Valley.

At the same time, you may have heard people from Silicon Valley are saying that no place will ever be like the Valley, with its unique concentration of capital, talent, and exit opportunities. While you’ve heard others say that the Valley is a crazy expensive place, crowded with a fierce competition and more noise than everywhere else.

Now, the interesting thing is that all the stories you’ve heard are true. In fact, they’re all pieces of the same puzzle. But the story of what this actually means for you, so far, has been untold.

Because in a world were entrepreneurs are everywhere, and capital is cheap, and building things is easy, while lots of places have been trying to reposition themselves to become tech hubs, Silicon Valley has been quietly repositioning itself too. Think about it. It’s a basic market law: When the entry barrier is high, a few well positioned players command the market; when the entry barrier is lowered, lots of new players enter the field, and the incumbents reposition by specializing, very often leveraging their leadership’s allure to address the high end/high value customer base.

That’s exactly what’s happening with the entrepreneurs/capital/talent market (yes, this as well is a market on its own). In this regard, the Silicon Valley can be seen as its Ferrari or its Prada: high value but crazy expensive and ultra-competitive “products” in a more and more commoditized market. Human resources are crazy expensive, company valuations are crazy high, capital availability is mind-blowing, but only if you fall in certain buckets. Is this a bubble? To me, it’s just a consequence of this new global paradigm.

Because, you see, Silicon Valley is composed of people that made 1 million users in a day, that sold companies for $500M+, that made more than 750 investments, that manage billion-dollar funds. The Valley has always been excited about doing hard things, and if starting companies is not hard anymore and everybody can do it, it’s not exciting anymore. You know what’s hard and exciting, instead? Scaling them. Getting your monthly active users from 10k to 1M in 2 years; that’s hard. Or getting your revenue from $100k to $10M annualized, that’s hard.

Or getting teams from 10 to 1,000 people, that’s hard. And that’s what Silicon Valley does best and is most excited about. And, coincidentally, that’s also where most of the company value is generated. The consequence? Silicon Valley is no longer the best place to start a company (unless you’ve already been living there for a while now, of course) because everywhere else is. And “everywhere else” is the rest of the world — with cheaper talent, lower cost of living, and good access to initial capital as well — but also the rest of the U.S. outside of the tech hubs.

Whether that’s good or bad, I don’t know. But it’s something you need to be aware of. That has been my advice lately to a few people asking for perspective from a guy who comes from Europe but has spent the last few years in the Valley. It’s a wonderful place, but it’s a very challenging one also. So if you’re starting something today, DO NOT come to Silicon Valley right away. It’s less expensive, less risky, and probably easier to start somewhere else, due to less competition.

Get some level of product-market fit first, get some early traction; then — if you need it — raise some money where your network is stronger (again, guess where that is) and *only then* think about getting to the next level and moving to Silicon Valley. At that point, you’ll need a story: In Silicon Valley, you’re interesting if you’re relevant, and you’re relevant if your story is backed by hard numbers of user adoption and market traction. Because if everybody can start something, how do you decide who’s the real deal? You look (and ask) for more results than the average.

Welcome to the new Silicon Valley.

Armando Biondi is cofounder and COO of AdEspresso, a Saas Solution for Facebook Ads Optimization. He lived in Italy until 2010, and while he has now relocated to San Francisco, he still spends 2-3 months a year in Italy. He previously cofounded Pick1 and four other non-tech companies. He’s also an angel investor in Mattermark and 10 more companies, is proudly part of the 500 Startups network, and is also a former radio speaker.

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Marc Kneepkens's insight:

Some good advice for startups. Get traction, show numbers, only then go to Silicon Valley.

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How VCs Use Kickstarter to Kick the Tires on Hardware Startups

How VCs Use Kickstarter to Kick the Tires on Hardware Startups | Venture Capital Stories |

It can be a hard life for hardware startups. Investors are nervous enough about backing an unproven product. Add to that the costs of manufacturing and you can understand why purely digital startups may seem like a less risky bet.

But some of that fear is being eased by crowdfunding platforms such as Kickstarter and Indiegogo, where startups can raise money from the public to build prototypes or start manufacturing their product. Successful campaigns on those sites can answer a lot of the initial questions that venture capitalists have. And lead to investments.

During the first half of this year, 26 percent of the 73 hardware startups that received venture funding had also raised money through a crowdfunding site, according to a report released today by research firm CB Insights. That's up from 18 percent in 2013 and 10 percent the year before.

In the minds of VCs, crowdfunding sites have helped shift the question from whether the idea "will have a product-market fit" to "can the company execute and scale manufacturing," said Sean O'Sullivan, managing director at SOSventures, which developed a number of accelerator programs including one focused on hardware startups called HAXLR8R.

A crowdfunding campaign allows a VC to "talk to customers, track return and/or failure rates, and then fund expansion with real data," said Barry Schuler, managing director at DFJ Growth, in an e-mail. He's also on the board of Formlabs, a maker of lower-cost 3D printers that raised $2.95 million in 2012 on Kickstarter with more than 2,000 backers. DFJ Growth and SOSventures both participated in a Series A funding round about a year after the Kickstarter campaign.

"It becomes an ultimate test market," he said, referring to crowdfunded campaigns that successfully deliver their products. Schuler, who was one of Formlabs' first customers, sees crowdfunding as a good way to scout out promising new products.

Campaigns also involve attractive descriptions of the product as well as good demo videos, which can give investors "some perspective on their marketing skills and sales skills," said Anand Sanwal, CEO of CB Insights.

While hardware startups are making some splashes, they still make up a small portion of total venture capital funding and the number of investments made. Venture capitalists invested in 3,354 startups in 2013, and 3.8 percent of those were involved in hardware, according to CB Insights data. In the first half of 2014, 3.9 percent of 1,854 that received funding from investors were hardware startups.

O'Sullivan expects the trend to accelerate as demand for devices connected to the Internet, such as wearables, heats up.

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One of the ways to use crowdfunding is to 'test' the markets and find out what customers want. VC's are cleverly using this.

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America's Entrepreneurial Spirit is Dying

America's Entrepreneurial Spirit is Dying | Venture Capital Stories |
With all the tech startups flooding the market, it would seem that America is more entrepreneurial than ever. But just the opposite is true. According to a pair of reports from The Brookings Institution, American entrepreneurship has been declining since the 1970s.

Brookings' reports reveal that American business has become steadily less dynamic in the past three decades. Instead of creating new companies, would-be entrepreneurs are increasing going to work for established corporations. And the rate of corporate consolidation is only making the statistic worse.

Now, for the first time since Brookings began tracking the data, more businesses are dying than being born in America.


As New York's Daily Intelligencer describes, all the media fanfare over startups is only masking the truth behind the state of entrepreneurship:

But the glitz, glamour, and big money of San Francisco — as well as the cultural potency of and media attention paid to start-ups — shroud a hard truth. The country is getting less entrepreneurial. In aggregate, firms are aging. People are starting fewer new businesses, and older businesses are doing better than their younger competitors. For all the talk of "disruption" in today's economy, it is better to be a big, old incumbent dinosaur than it is to be a lean, mean start-up.

This isn't just bad for potential founders, Brookings says. The trend curbing "creative destruction" has the potential to make the entire American workforce less productive:

Research has established that this process of "creative destruction" is essential to productivity gains by which more drive out less productive ones, new incumbents, and workers are better matched with firms. In other words, a dynamic economy constantly forces labor and capital to be put to better uses.

The problem isn't relegated to "The Paper Belt"—Silicon Valley's dismissive name for Middle America. Brookings reports that the entrepreneurial downturn transcends any particular state and region. The trend has been observed in all 50 states and "in all but a handful" of the 360 metropolitan areas tracked.

What's more? "This decline has been documented across a broad range of sectors in the U.S. economy, even in high-tech."

Brookings' reports are not all doom and gloom, however. The public policy organization notes that "business accelerators" are a "welcome development." And immigrants, being statistically twice as likely than native-born Americans to start businesses, could be allowed in the country in greater numbers to help reverse the trend.

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Marc Kneepkens's insight:

A different opinion, with some positives though.

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How Design Thinking Transformed Airbnb from a Failing Startup to a Billion Dollar Business

How Design Thinking Transformed Airbnb from a Failing Startup to a Billion Dollar Business | Venture Capital Stories |
In 2009, Airbnb was close to going bust. Like so many startups, they had launched but barely anyone noticed. The company’s revenue was flatlined at $200 per week.

 Split between three young founders living in San Francisco, this meant near indefinite losses on zero growth. As everyone knows, venture investors look for companies that show hockey stick graphs, and according to co-founder Joe Gebbia, his company had a horizontal drumstick graph. The team was forced to max out their credit cards.

It's Okay to Do Things That Don’t Scale

At the time, Airbnb was part of Y Combinator. One afternoon, the team was poring over their search results for New York City listings with Paul Graham, trying to figure out what wasn’t working, why they weren’t growing. After spending time on the site using the product, Gebbia had a realization. “We noticed a pattern. There's some similarity between all these 40 listings. The similarity is that the photos sucked. The photos were not great photos. People were using their camera phones or using their images from classified sites.  It actually wasn't a surprise that people weren't booking rooms because you couldn't even really see what it is that you were paying for.”

Graham tossed out a completely non-scalable and non-technical solution to the problem: travel to New York, rent a camera, spend some time with customers listing properties, and replace the amateur photography with beautiful high-resolution pictures. The three-man team grabbed the next flight to New York and upgraded all the amateur photos to beautiful images. There wasn’t any data to back this decision originally. They just went and did it. A week later, the results were in: improving the pictures doubled the weekly revenue to $400 per week. This was the first financial improvement that the company had seen in over eight months. They knew they were onto something.

This was the turning point for the company. Gebbia shared that the team initially believed that everything they did had to be ‘scalable.’ It was only when they gave themselves permission to experiment with non-scalable changes to the business that they climbed out of what they called the ‘trough of sorrow.’

“We had this Silicon Valley mentality that you had to solve problems in a scalable way because that's the beauty of code. Right? You can write one line of code that can solve a problem for one customer, 10,000 or 10 million. For the first year of the business, we sat behind our computer screens trying to code our way through problems. We believed this was the dogma of how you're supposed to solve problems in Silicon Valley. It wasn't until our first session with Paul Graham at Y Combinator where we basically… the first time someone gave us permission to do things that don't scale, and it was in that moment, and I'll never forget it because it changed the trajectory of the business”

Why Designers Need to ‘Become the Patient’ to Build Better Products

Gebbia’s experience with upgrading photographs proved that code alone can’t solve every problem that customers have. While computers are powerful, there’s only so much that software alone can achieve. Silicon Valley entrepreneurs tend to become comfortable in their roles as keyboard jockeys. However, going out to meet customers in the real world is almost always the best way to wrangle their problems and come up with clever solutions. 

Gebbia went on to share how an early design school experience also shaped his thinking about customer development, “If we were working on a medical device, we would go out into the world. We would go talk with all of the stakeholders, all of the users of that product, doctors, nurses, patients and then we would have that epiphany moment where we would lay down in the bed in the hospital. We'd have the device applied to us, and we would sit there and feel exactly what it felt like to be the patient, and it was in that moment where you start to go aha, that's really uncomfortable. There's probably a better way to do this.” This experience pushed Gebbia to make ‘being a patient’ a core value of their design team.

The desire to always be the patient is immediately felt by all new team members. “Everybody takes a trip in their first or second week in the company and then they document it. We have some structured questions that they answer and then they actually share back to the entire company. It's incredibly important that everyone in the company knows that we believe in this so much, we're going to pay for you to go take a trip on your first week.”

Let People Be Pirates

While Airbnb is data driven, they don’t let data push them around. Instead of developing reactively to metrics, the team often starts with a creative hypothesis, implements a change, reviews how it impacts the business and then repeats that process.

Gebbia shares, "I'm not sure how useful data is if you don't have meaningful scale to test it against. It may be misleading. The way that we do things is that if we have an idea for something, we now kind of build it into the culture of this idea that it is okay to do something that doesn't scale. You go be a pirate, venture into the world and get a little test nugget, and come back and tell us the story that you found."

Individual team members at Airbnb make small bets on new features, and then measure if there’s a meaningful return on the bet.  If there’s a payoff, they send more pirates in that direction. This structure encourages employees to take measured, productive risks on behalf of the company that can lead to the development of major new features. It allows Airbnb to move quickly and continually find new opportunities.

“We’re trying to create an environment where people can see a glimmer of something and basically throw dynamite on it and blow it up to become something bigger than anyone could have ever imagined.”

Everyone Learns to Ship On Day One

As part of the onboarding process at Airbnb, the company encourages new employees to ship new features on their first day at the company. It earns them their sea legs and shows that great ideas can come from anywhere. This approach yields results in unexpected ways. For example, one Airbnb designer was assigned what seemed like the small task of reevaluating the “star” function. In the original Airbnb product, users could ‘star’ properties to add them to a wish list — a basic feature. Gebbia recounts the story:

“Our new designer comes back and says I have it. I go what do you mean you have it? You only spent the day on it. He goes, well, I think the stars are the kinds of things you see in utility-driven experiences. He explained our service is so aspirational. Why don't we tap into that? He goes I'm going to change that to a heart. I go, wow, okay. It's interesting, and we can ship it so we did. When we ship it, we put code in it so we can track it and see how behavior changed.”

Sure enough, the simple change from a star to a heart increased engagement by over 30%. In short, let people be pirates, ship stuff and try new things.

Parting Words

When you’re building product at a startup you’re always moving a million miles an hour. It’s tough. You need to ship. Gebbia tries to balance this reality with the need to think in new ways by constantly pushing his team to think bigger. He notes, “Anytime somebody comes to me with something, my first instinct when I look at it is to think bigger. That's my instinctual piece of advice. Think bigger. Whatever it is, blow it out of proportion and see where that takes you. Come back to me when you've thought about that times 100. Show me what that looks like."

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Via Günter Schumacher
Marc Kneepkens's insight:

This is very significant. Never lose touch with your client. Look at things differently, from many angles, and try to see through the eyes of your client.

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What's driving venture capital? Google & other tech giants' rush to be conglomerates - The Economic Times

What's driving venture capital? Google & other tech giants' rush to be conglomerates - The Economic Times | Venture Capital Stories |
Facebook, Google and other Internet titans have been busy transforming themselves into Web conglomerates, making fortunes for the venture capital industry.
But is it good for everyone else?

The stream of acquisitions has been head-shaking. Facebook acquired the social media companies WhatsApp for $16 billion and Instagram for $1 billion. Google acquired the thermostat and smoke alarm developer Nest for $3.24 billion and Waze, a social mapping startup, for $1 billion, while Apple bought the music brand Beats Electronics for $3 billion.

The titans' buying spree has not just minted more than a few 20-something millionaires; it has r ..
evolutionized the venture capital business model. Outside of the technology bubble, it used to be that someone struggled for years to build a company before it went public. Sure, some companies were sold when they were at an early stage with little, or even no, revenue, but that strategy reaped tens of millions of dollars, not billions.

The deep pockets and willing buyers among Google and the like have changed the venture capital strategy. Now, the idea is to move into a hot space - soc ..

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Unique 3D Startups And The Public Companies That Should Buy Them

As the 3D space shows signs of becoming less novelty and more mainstream, the idea of acquiring 3D startups does too.

Here are five 3D startups, each with a unique niche, along with publicly traded companies that could have reason to be interested in acquiring them – someday.

My Mini Factory

My Mini Factory launched last year and, according to founder/entrepreneur, Sylvain Preumont, aims to become the YouTube of 3D files. The website allows users to download free 3D printable designs, upload their own designs (from which they can make money), and request custom printed 3D objects.

As 3D printing and printer sales grow, so will demand for pre-designed objects to print. As a repository for those designs, My Mini Factory could represent a unique investment for companies including major 3D printer-maker 3D Systems (NYSE: DDD), which has shown interest in expanding its service offerings.

Pirate 3D

Price has been holding back 3D printer sales. MakerBot’s latest model, Replicator 2, costs anywhere from $1,500 to $2,100, depending on supplier. Palo Alto-based startup Pirate 3D makes a model called Buccaneer that will sell for about $350.

The first run of printers, according to a recent Pirate 3D blog post, will take place in November. Advertising itself as “The World’s Friendliest 3D Printer,” the combination of low cost and ease-of-use could make Pirate 3D and its Buccaneer attractive to a company like Hewlett-Packard (NYSE: HPQ), which said in March it planned to enter the 3D printer market.


Biotech startup, Organovo (NYSE: ONVO), has focused on the development of 3D printed biological materials. Since its founding in 2007, the company has conducted groundbreaking research in creating synthetic human-like tissues.

In addition to potential use as replacement organs and tissue, these materials could also be used by researchers to test the effects of new drugs.

With the recently announced partnership between Organovo and Johnson & Johnson (NYSE: JNJ) division Janssen Research and Development already on the books, it would not be a stretch to see the partnership turn into something more serious down the road.


Companies like Shapeways that sell 3D printed objects lack the immediacy that some consumers demand. Enter Dreambox, the brainstorm of three UC Berkeley undergrads.

Dreambox is a 3D printing vending machine, currently housed only on the UC Berkeley campus. That status wouldn’t last long if an enterprise like Crane (NYSE: CR) a large-scale manufacturer of automatic vending machines decided to pounce.

Thinker Thing

Think of an object. What if you could turn that thought into the actual object? Startup Thinker Thing is in the process of turning that idea into reality.

The company is creating software that would allow the user to put on an EEG headset, picture an object and have that object printed by a 3D printer.

Thinker Thing would seem to be of obvious interest to at least one very large tech company that has already shown a desire to connect computers and brains: Google (NASDAQ: GOOGL).

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Marc Kneepkens's insight:

3D printing is becoming more accessible now, with many companies interested in taking their cut.

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