Marc Andresson launches a new venture fund !

Some interesting points he made (not sure how accurate they are but I'll mention them anyway)

1. Only 10-20 of 700 funds he knows deliver good returns

2. There are exits, just not enough: Data Domain : likely to sell for $2 billion, Pure Digital - Cisco; OpenTable IPO and LogMeIn filed for IPO recently

3. 15 tech companies launched per year can get to $100 million in revenues. They're responsible for 97% of VC returns

His model will be the Valley model. Give a small company money for up to 5 engineers. If they build a good product, give them $5-10 million. He will only invest in the Valley. He will only do tech/internet/infrastructure in the spaces he knows.

Marc founded Netscape, Ning and Opsware (earlier known as LoudCloud). He is a well known Valley angel investor with several bets that seem to be working (Twitter, Digg, Delicious). He has a great blog but I haven't visited it in a while after he stopped writing. He's also an enormously insightful panelist.

VC Non Admissions

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2008 Venture Capital Investment Competition

The Venture Capital Investment Competition ended this weekend at the University of North Carolina. It is a national event, and (if you’re at MIT) up to 20 teams taking part to represent their colleges at the regionals, and one team from each region advances to the finals. I was fortunate to be a judge at the regional VCIC held at MIT Sloan, which was won by Wharton in a group that faced very stiff competition. Wharton was unique in winning because while there were stronger teams with technical expertise in venture capital, the Wharton team showed uncanny operational expertise. From what I read about the Finals (which I did not have the bandwidth to attend), the Wharton team did well again, thinking outside the box, but was unable to win the competition - but they did get the Entrepreneur's Choice Award.

MIT Sloan won for the 2^nd year in a row. I did not get a chance to see the MIT Sloan team in action (since they did not take part in the Boston regional so they would not have a home-team advantage). However, the strength of entrepreneurship and venture capital at MIT is clear. The winning team of Bob Meese, Sim Blaustein, Gaetan Bonhomme, Nikhil Garg and Eric Varma.

University of Washington and University of North Carolina placed 2^nd and 3^rd respectively.

We should certainly credit to the entrepreneurs, without whom there would be no competition. The entrepreneurs for once are in the drivers seat, though they are still potentially selling to the judges, who are mostly VCs. The VCIC finals had 20 VCs, so it was a great opportunity for the entrepreneurs. Its actually fun to see the VCs selling their firms to the entrepreneurs !

I noticed that Widetronix, a Cornell startup, showed up at the finals. Good for them to get on the road. Since ultimately this competition is good training for any entrepreneur (since they get to see the business from the other side), I hope it was worthwhile for all of them. The stats are certainly in favor of the entrepreneur. According to Patrick Vernon, who has been running this competition for years out of UNC, he sent a recent email that said: “As a former judge, you know the value of VCIC to presenting entrepreneurs, but did you know that 40% of the entrepreneurs selected to present at the Finals go on to raise an average of $9M in venture capital.”

To read more about VCIC click here.

2008 Cornell Business Idea Competition Winners

The impressive winners of the Business Idea Competition 2008 came from a wide range of sectors. Internet, Lifesciences, Automotive and Energy. However, the themes were common - green with a dash of life sciences. Congratulations to all the entrepreneurs and innovators.

1. Free Green: A new online business for green residential buildings
2. GeneWeave: A point-of-care diagnostic company
3. The Hundred (a new green car) and ESP Solar (invention to improve solar panel efficiencies)

In case you wish to contact these companies, please email Gwen. She is at gmg25 AT cornell.edu. The Johnson School is responsible for hosting the competition. More information can be found on
http://www.johnson.cornell.edu/brv/bicinfo.html

The problem with business plan competitions (and why I like Cornell's)

This week was Entrepreneurship Week @ Cornell. For the second year in a row, I've judged the Business Plan Competition.

I love going to Cornell for this event for three reasons.

Firstly, its my alma mater, and the event is full of energy and excitement of Cornellians coming home.

Secondly, the judging event is a combination of grilling the entrepreneurs and providing them with a lot of advice at the same it. If you are "mentorable" and your idea is "fundable" we want to see you get a Series A round of financing, and we'll work hard to try and make it happen.

Lastly, and most importantly, ideas show up that are potentially venture fundable.

So now onto the real reason for this post. I've participated in business plan competitions, not only as a judge, but also as a participant. I've even won a couple.

What I've realized in hindsight is that winning a business plan competition only incrementally improves your odds of having a successful business, versus not winning one. You get a check and the money is sometimes substantial. (We won $25K which allowed us to launch the company). However, for the most part, after the competition you're still stuck with the same problem.

I call it: "That's-great. Now-what-do-I-do."

Winners realize this after winning the competition. I was surprised that venture capitalists or investors weren't lining up to fund the business. There were no angels or foundations at the competition who would really have given us the money we really needed. I also don't know what the judges really meant when they said I was a winner. Is it because:

a) We had an original idea
b) We had done the most homework and did a great job answering your questions
c) We had the best presentation
d) We had a great management team and were the most likely to succeed

Having been on the other side, dynamics of each group differ. Groups of judges may pick the winners for completely different reasons. The most useful information I have realized is to find out:

a) what the judges really think about the fundability of my plan; and
b) what do I need to do (or more importantly, who do I need to call) to build a company.

So to all of you dreaming of the phones ringing off the hook after you win the high profile international business plan competitions, I have one message.

Stop dreaming.

Use the day to identify people at the competition who liked your idea and will be willing to spend time with you. Akamai (a company that did not win the MIT50K, although it was a semi-finalist) became a big company. I don't remember who won that year. Go to several business plan competitions to find judges who find what you are doing intriguing, and are able to pass on contacts that will create a big company.

Especially go to competitions where angels show up. Or where you have a connection.

At Cornell, almost all the judges went to Cornell. There is a shared passion to make things happen long after the check has been cashed, the congratulations have been sent, and the partying has ended.

For those of you who organize business plan competitions, create task forces that include the resources of your school, alums, and judges, so you can help the winners and finalists take the necessary steps to:

a) fix their plans
b) augment their management teams
c) raise research and commercialization grants from Government and Private Foundations
d) get access to angels and
e) eventually get Series A funding

I hope the Big Red Venture Managers at Cornell can create such a culture this year. The entrepreneurs are best served if every competition becomes this way. Then we will accelerate the pace of innovation and make the world a more interesting place. Business plan competitions will become a real way to find the next big ideas. More young people, researchers and innovators will be inspired to dream big.

Cornell's efforts over the next year may yet create a model. Time will tell.

So you want to be a venture capitalist

While being successful as an entrepreneur is one path to venture capital, it is not the only one. Good investors need not be good entrepreneurs and vice versa. The important thing is that a venture capitalist must understand and respect what the entrepreneur does, realize what a tough job it is, and be able to add significant value to increase the chances of success for the entrepreneur.

To join venture capital, it is important to show that you exhibit behavior that is typical of someone who is or should be in the business of investing and building companies. venture firms need Associates and Principals to process and execute deals, and support the work that Partners do in building companies, and these Associates and Principals are (sometimes but more often than not) successful entrepreneurs.

What is ultimately important is to understand whether you are good at investing, and have a mind-set for helping growing companies. By answering these questions for yourself, you can demonstrate that you have an understanding of the business, and what it means, even though you may never have stepped inside a venture firm.

Since I get asked this question all the time, I thought I’d put together a list of questions particularly for the younger (sub-35 crowd) who are not in venture capital but want to get into the industry. You can use these questions as a set of proactive responses to provide to someone about what you’ve done to become relevant, or as a list of action items of things to do if you really want to get in.

QUESTIONS (IN INCREASING ORDER OF IMPORTANCE)

Fundamental Skills

• Have you ever written a business plan (powerpoint alone is sufficient)
• Have you taken part in a business plan competition. If so, how did you do and who was on your team. Did you win ?
• Have you built an excel model showing financial projections of a business to a detailed level. Do you understand the revenue drivers of the company ?
• Have you taken classes in venture capital and/or entrepreneurship
• What do you think are the three most important personal characteristics or skills for being a successful VC
• What are the three most important characteristics of being a successful
• entrepreneur

Skills in Financing and Investing

• Have you read any books written by entrepreneurs or VCs.
• What is your favorite sector to invest in - explain your investment thesis and why this sector will make money
• If you’ve never invested in the private sector, have you made any public sector investments ? What stocks are you picking and why (this could be a parallel to show that you can think like an investor)
• What are the most important terms in venture deals. Are you familiar with the basic terms of VC deals. Could you read a term sheet ?

Knowledge: Markets & Companies

• What are the most interesting VC deals in recent times that you know of
• Have you done a detailed market reviews, studied different business models of startups and the problems they are solving, and tried to understand how they intend (or are) making money ?
• Do you have detailed knowledge of a sector (global) especially the startups in that sector ? Are there any startups that you like. If so, why do you like them ?
• Do you have any business ideas of your own ? Can you pitch them to me in 30 seconds ?

Actions: Entrepreneurship

• Have you helped anyone start a company. What did you do for them and what happened to the venture. What was your contribution ?
• Have you ever invented a product or been a part of that creative process ?
• Have you started a company or entrepreneurial venture of any kind

Relevant Experience

• Have you ever raised money for someone
• Are you strong technically ? (Engineering, Science or Medical degrees) ?
• How large or diverse is your rolodex ? How strong is your network. Do you know people who can open doors. If not, do you display characteristics of someone who can build a strong network. Would you be good at Human Resources / Headhunting ?
• Have you ever sold anything ? If not, do you have marketing and business development experience or an understanding of these functions (for late stage companies)

I am sure all VCs will have different perspectives, and this is one of many. However, I hope it is useful.

2007 Cornell Business Plan Competition Winners

1st Place

e2e Materials produces strong, biodegradable composites from annually renewable fibers and soy protein, an agricultural commodity. Based Cornell technology, its products replace toxic, petroleum-based materials filling landfills. The company is commercializing a formaldehyde-free, cost competitive alternative to particleboard. Formaldehyde, a carcinogen, is being legislated out of the $6.3B particleboard market. http://e2ematerials.com/

2nd Place

DNANO Systems LLC has a long term vision of offering protein-based medicines to patients at much lower costs. DNANO will achieve that goal by commercializing a proprietary technology to rapidly produce proteins at super high yields without involving living cells, hence eliminating costs associated with cell-based manufacturing processes.

3rd Place

Veratag, Inc.'s mission is to change the cost-benefit equation for security in radio frequency identification (RFID) systems by building on work done at Cornell University's Craighead Research Group. The innovation is micro-electro-mechanical systems (MEMS) resonators which produce unique analog signals that can be used for identification, authentication and counterfeit prevention.