Tuesday, January 31, 2012

For Newcomers in Silicon Valley, the Dream of Entrepreneurship Still Lives



SAN FRANCISCO — Atha Fong, 22, has trouble explaining to her mother exactly what she does as a product manager at iSkoot.

“Basically, her understanding is that I work with engineers to make mobile phone applications, but more than that, not really,” she said.

Her more than $70,000 salary, stock options and personal investment portfolio, though, go a long way to alleviate any parental concerns.

Ivan Lee, 25, turned down a lucrative offer from Microsoft to start his own company, developing location-based games that he hopes will eventually dominate the industry. Bansi Shah, 23, picked up her undergraduate diploma, then took a job at Lattice Engines, a small San Mateo startup, where she makes “near the top” of the company’s $80,000 to $130,000 range for an entry level product manager, plus equity.

These are the latest high-tech migrants to Silicon Valley, in their 20s and fresh out of college, drawn by a surge in start-ups and investment money that in the last year and a half has created more jobs than companies can fill, and eager to help shape the technology that infuses their lives.

Their peers in other parts of the country — indeed, in many other parts of the state — may be struggling to find jobs, their independence stunted by financial hardship. But these recent college graduates are, at least for the moment, snugly protected from any hint of the recession.

“We’ve always had this gravitational pull,” said Julie Hanna, a serial entrepreneur who sits on the boards of a number of successful companies, “and then on top of that, we have the economic contrast, because the rest of the country looks like a desert and here money is flowing freely.”

Boom and bust cycles are endemic to Silicon Valley, where many older denizens have vivid memories of the giddy highs of the 1990s and the desperate lows that followed, when the dotcom bubble burst.

But buoyed by the frenzy of entrepreneurship around them, many young newcomers exhibit an optimism and confidence no economist could dampen. To some who have watched successive generations land here, this latest crop seems brash and entitled, with short attention spans and a video-game approach to life. Others see in them a social conscience and maturity that set them apart from the high-tech gold diggers of the 1990s.

Still emerging from their student years, most have yet to translate their earnings into material tokens of success. In San Francisco’s expensive housing market, they tend to rent rather than own, often sharing quarters. They drive Hondas and Fords and maybe a Mini Cooper or two. In the tradition of start-ups here, they dress in jeans and other casual attire, augmented by the occasional pair of Bonobos.

At bars in the Mission District or trendy restaurants in the Marina District, they chatter about software upgrades and angel investors and new applications that could change the world — or at least the way people use their iPhones. They go hiking rather than clubbing, look with a hint of impatience at their less social-media-savvy elders, are picky about their sushi and unhappy with iceberg lettuce.

The temples of the valley — Facebook, Google, Twitter, Zynga — loom large in their conversation. Some have already founded companies; nearly all have toyed with the idea.

“It’s always at the back of my mind,” said Danny Schauffer, who landed a job at Facebook after college and now works on the company’s platform operations team.

Many started fending off job offers even before graduation, besieged by recruiters desperate to fill slots at established companies and start-ups, which at the last count numbered about 23,000, according to Russell Hancock, chief executive of Joint Venture, a company that analyzes Silicon Valley trends.

Computer engineers, in high demand but short supply, can command six-figure salaries right out of college, augmented by signing bonuses and equity or stock options. Eric Roberts, a professor of computer science at Stanford, said he knew of at least one $160,000 offer “and I imagine there are larger numbers that I just don’t know about.”

But technical skills are not essential. The rise of social media, with its more human face, has drawn graduates in history, psychology or music, and a slowly growing number of women and minorities.

Morin Oluwole, 27, grew up in Nigeria, moved to California in high school and graduated from Stanford with a bachelor’s degree in biology and Spanish, a master’s in sociology and a strong interest in fashion. Now she works in strategic partnership development at Facebook, helping fashion designers “engage online.”

“What I’ve done is to turn my personal interests into what I do for a living,” she said.

Ms. Oluwole’s salary and benefits, she said, allow her “to live more of a wider-range lifestyle,” to travel and go hiking in Argentina and travel to other cities for events.

“You just have more disposable income to have an idea and actually act on that idea,” she said.

Though many new graduates are content to draw high salaries working for others, entrepreneurship is still the elixir of the valley, but failure has a lower cost: anyone with an idea and a few hundred dollars can raise the money to take a spin on the start-up wheel.

“I might be losing two years of salary, but no risk, no reward,” said Mr. Lee, who still receives regular queries from recruiters at Facebook and Google but pays himself $2,000 a month and shares a house with co-workers at Loki Studios, the company he founded.

“It’s a nice dream to have: If I didn’t have to answer to anybody, if I could run my own company,” he said. “Everyone has a friend who was at a start-up and made their own fortune, and everybody is curious if they could do it, too.”

Still, making billions of dollars is not what propels him, Mr. Lee said. “The long hours, the stress, the roller coaster — if that’s your primary reason, you’re going to burn out so quickly,” he said.

Randy Komisar, a venture capitalist and serial entrepreneur, says the cavalier attitude of some young entrepreneurs worries him, and he wonders if they have the grit and resilience to cope if boom turns to bust.

“I think there’s something as too much self-esteem,” Mr. Komisar said. “Everybody is doing their app, and everybody is doing a start-up, and everybody has raised a million dollars.”

Most, he said, “have no clue how to connect the dots” to create a sturdy, long-term product.

“My guess is that at some point the music stops and we find out that there’s not just one less chair but hundreds of thousands of less chairs, and we’ll have thousands of kids who haven’t learned anything because they’re all expecting to learn from each other,” he said.

Professor Roberts, who has watched enrollment in computer science courses shoot up in the last year — a class that last spring had 70 students now has 200 — is less concerned. The newest crop of Silicon Valley hopefuls, he said, are “interested in making enough money, but the crazy multiple millions of dollars that no one can spend, that I don’t think is driving as much of the equation as it used to be. Increasingly, there are people who want to work on technology because they see that as a way to help people in the world who just aren’t benefiting from that technology.”

In fact, as a group of former and current Facebook employees, including Ms. Oluwole and Mr. Schauffer, dined on ahi tacos and rock shrimp tempura at Umami in Cow Hollow on a recent evening, it was Bill Gates who was singled out as a role model, his bank account a definite plus but his philanthropy more important.

“Hitting the lottery is secondary to making a change,” Mr. Schauffer said.

Angel Investors Play Big Role For Start-Ups, Think Tank Says



Angel investors—wealthy individuals who provide capital to start-ups with the potential for fast growth—are an increasingly important source of capital to early stage companies, including in Europe, one recent report says.

The report by the Organization of Economic Cooperation and Development is among the first to gauge angel investing activity around the world.

Calculations by the Paris-based think tank suggest that the total amount of capital raised from angel investors in the U.S. was $17.7 billion in 2009, compared to $18.7 billion for venture capital. The bulk of the venture capital money went to companies that were at later stages in their growth cycles, the report notes.

In Europe, the angel market in 2009 reached $5.5 billion, surpassing all venture capital funding by some $250 million, according to the report, which is based on interviews with roughly 100 investors, entrepreneurs and business leaders in 32 countries.

With banks reining in all but the safest loans since the recession, and venture capital firms now targeting less risky late-stage business startups, angel investors are nearly alone in backing young, fast-growth companies, the report says.

The VCs tend to target high-tech hubs, like Silicon Valley.

But angels are more prone to support entrepreneurs in their own back yards, with typical funding rounds ranging from $25,000 to $500,000, the report says. At the same time, they're less sensitive to ups and downs in the economy and tend to invest in a "much wider range of innovation" than VC investment firms, the OECD report concludes.

In the U.S., angel investors are now putting more cash into biotechnology and health-related ventures, rather than IT, which was an investor magnet for decades, for instance. That's partly due to the rise of angel investing groups over the past decade. By pooling smaller sums together into big funding rounds, these groups are able to spread the risk of betting on promising ventures in less hot sectors.

As a result, angel investing itself is becoming a more formalized process – complete with more rigorous due diligence.

Beyond cash, angels play an often overlooked but crucial mentoring role for new business owners as successful entrepreneurs themselves, offering hands-on experience and a network of valuable contacts, the report notes.

But policy makers have tended to focus efforts on the higher profile venture capital market, however. To better drive the global economic recovery, the OECD recommends tax incentives for angels and angel groups, co-investment programs, or even public funding for national angel associations.

Many fast-growth, entrepreneurial ventures that attract angels are the same start-ups that create jobs. Led by start-ups, small firms have generated 65% of net new jobs over the past 17 years, according to the Small Business Administration.

Still, some critics say wealthy investors shouldn't need costly tax incentives to back promising ventures, especially as many countries enact tough austerity measures aimed at balancing national budgets in the wake of the financial market crisis.

Others worry tax breaks will draw in institutional investors. Institutional investors may not provide start-ups with the business-management expertise or potentially valuable contacts as the typical individual angel investors might provide.

Of the $8.9 billion in total investments by angels in the first half of 2011, 39% went into seed and start-up ventures, up from 26% of $8.5 billion in total investments over the same period in 2010, according to data from the University of New Hampshire's Center for Venture Research. It hasn't yet released data for 2011's second half.

Monday, January 23, 2012

Vietnam's Dot-Com Boom


Favorable demographics make the country an attractive market for Internet entrepreneurs

By Bruce Einhorn, K. Oanh Ha and Diep Ngoc Pham

Hanoi resident Nguyen Thi Lan Phuong is an e-merchant’s dream. She likes to go shopping but has little time to fight the Vietnamese capital’s crowds and traffic, so the mother of two frequents NhomMua and Muachung, two of Vietnam’s many Groupon (GRPN) clones. Since discovering the sites in July, she’s bought clothes for her kids, pots and pans for her home, and facials for herself. “I sometimes buy things I don’t need, but it’s too good a deal to pass up,” she says.

Consumers like Phuong are attracting online entrepreneurs to a market they believe is on the cusp of an online revolution, one that could soon create Internet success stories on par with China’s Baidu (BIDU) and Tencent. “There’s a lot of interest in Vietnam’s information technology space right now,” says Deepak Natarajan, the Singapore-based director of Intel Capital, the chipmaker’s venture capital arm. “There’s huge growth potential there.” Of Vietnam’s 88 million people, about one-third are online—and most of those are young urban dwellers ready to shop. They’re “getting to the age where they are going to start consuming services online,” says Jonah Levey, chairman of Navigos Group, which owns VietnamWorks, a jobs website modeled on Monster.com (MWW). “It’s perfect for e-commerce.”

Vietnam already has more than two dozen sites mimicking Groupon, the Chicago company that offers steep discounts to spas, restaurants, and other merchants. The leaders include NhomMua, with 1 million registered members, along with Muachung and Cung Mua. “The market still has a lot of room to grow,” says Nguyen The Than, deputy general manager of Vietnam Communications, which owns Muachung. The companies have to make some big adjustments to adapt the U.S.-spawned group-buying model to a country that lacks a lot of infrastructure. Since most Vietnamese don’t have printers, NhomMua employs a team of over 100 couriers who scoot around Hanoi and Ho Chi Minh City on sky-blue Honda motorbikes delivering vouchers to customers. The messengers also collect payment in cash, since few Vietnamese have credit cards or use PayPal-like e-wallet services.

Such problems have kept NhomMua confined to major metropolitan areas. “The growth rate is a lot slower than other countries because we have to handle the logistics,” says Tom Tran, chief executive of MJ Group, which owns NhomMua.

Solving the online payment problem is the biggest challenge for Vietnam’s e-commerce players, says Ha Hong Hao, the CEO of Tretho Information Service, which owns a parenting website with 700,000 members. “For payment, you have to work individually with each bank and cooperate with many middle guys,” she says. “It’s still a big barrier for this business.”

There are other stumbling blocks, including the government’s half-hearted flirtation with censorship. (Despite some attempts to block social networking sites, Facebook remains one of the most popular websites.) Yet the demographics make it an irresistible market for entrepreneurs like Bryan Pelz, who has advised the gaming site VinaGame in Ho Chi Minh City. It’s “basically a country of young and very bored people,” he says.

The bottom line: One-third of Vietnam’s 88 million people are online, and some entrepreneurs talk of an Internet boom.

Wednesday, January 18, 2012

StartupPlays Offers An Affordable (Virtual) Alternative To Startup Accelerators


Founders and entrepreneurs are likely familiar with some of the more well-established startup incubators and accelerators out there, like Y Combinator, TechStars, 500 Startups, Founder Institute, DreamIt — to name a few — all of which provide terrific opportunities and resources for their founding teams. Of course, many of these come with a price, requiring founders to hand over five to ten percent equity for seed investments of around $25,000.

Naturally, many young entrepreneurs with their eyes on the fast-track are eager to sign up because of the reach of these accelerators’ networks. However, Scott Annan, the founder of Network Hippo and Mercury Grove, believes that not all veteran entrepreneurs are looking for the type of hand-holding and guidance (or the level of time commitment, as they often run three-month programs) offered by incubators and accelerators.

That’s why Annan, through Mercury Grove, formed StartupPlays, which provides an online alternative to accelerators by offering a collection of “market-proven recipes” (or “plays”) that include targeted guidance written by successful entrepreneurs. While veteran entrepreneurs may be looking to avoid the cost of accelerators, Annan believes that they still want (and need) active mentorship and guidance in particular aspects of building a business, like fund raising, online marketing, or public relations.

So StartupPlays has partnered with veteran entrepreneurs and mentors to turn their experience into actionable guides. Through a collaborative virtual workspace, StartupPlays provides entrepreneurs with detailed tasks, file templates, and expert tips. For example, StartupPlays enlisted Adrian Salamunovic, the co-Founder of DNA 11 and CanvasPop and PR expert, to create a “play” that provides founders with everything they need to know about creating a professional PR engine. The template assures founders that, after reading, they will have “a media Calendar, press contact list, a killer pitch, and press in major publications.”

And, today, the virtual accelerator released its latest “Play”, which is authored by serial entrepreneur and CEO of TechCrunch Disrupt winner GetAround, Sam Zaid. Zaid’s Play focused on how founders can qualify for investor funding, including how to build a fundable company, how to evaulate the type of funding startups should look for, when to look for it, and how to increase the chances of closing a deal.

Other authors include Dan Martell of Clarity.fm, Jeremy Olson of Tapity (who authored a really cool Play on how to build and market a successful iOS app), Aaron Hall of DressRush, and Cameron Herold of BackPocketCOO. StartupPlays plans to release a new play every week through its official launch in February. While Plays aren’t free — they typically range from $75 to $300 — they provide great value for the price tag, especially in light of the alternative.

Entrepreneurs and founders are always looking for great resources that can help them stay ahead of the game and provide important tips on how to attract investors, approach term sheets, build a great product, find users, and hire. Seeing as there are over 4,200 early stage startups worldwide and launches this year are expected to increase, there’s plenty of competition for funding — and for eyeballs. The Web is filled with resources for entrepreneurs, but it’s often fragmented, difficult to navigate, and who wants to waste time searching online, parsing Q&A sites, or watching videos?

StartupPlays really does offer a great alternative, and a great complement to sites like TheFunded.com. It’s all about giving entrepreneurs the resources they need to execute on their ideas, and with virtual workplaces that offer task and check lists and document templates and center around specific projects, it can save you from wasting time researching and plotting and get you into execution.

The beginning “stealth” phase for StartupPlays has really focused on building out its content offerings, and with its official launch in mid-February, the virtual accelerator will start building out an ecosystem around (and within) that content. For example, the team will add a virtual, realtime forum for Plays that allow entrepreneurs to leave comments on different parts of the process, give feedback, and ask their fellow founders what’s working for them and what isn’t.