Video: The single biggest reason why startups succeed (Bill Gross)

Three Quick Things We Can Teach Entrepreneurs

By Allen H. Kupetz

The views expressed may not reflect the opinions of venVelo’s board or its investors.

I wear two hats. One is a professor who teaches entrepreneurship courses. The other is COO of a multi-million dollar early-stage investment fund. When investors find out I also teach, I’m often asked, “Do you really think you can teach entrepreneurship?”

“No,” has been my historical reply. “You are either born with it or you are not.”

A better answer would be, “No, I can’t teach someone to be an entrepreneur. But I can teach many things to someone who is an entrepreneur.”

Three Quick Things

1. Never confuse knowledge and wisdom.

I’ve written often about the difference between knowledge and wisdom: knowledge is knowing a tomato is a fruit; wisdom is knowing never put it in a fruit salad. Institutional investors are likely betting, among other things, that you have more knowledge than they do. But the hundreds of years of wisdom listening to your pitch and writing you a check can still teach you a lot.

Listen. Execute. Repeat.

2. Talk the talk.

Entrepreneurs need to truly understand the language of venture capital. Debt vs. Equity. VC vs. PE. Options vs. Warrants vs. Shares. Common vs. Preferred. Prefs. Don’t rely solely on your attorney or accountant. Read a couple of books. Follow the blogs of Mark Suster (http://www.bothsidesofthetable.com/) and Fred Wilson (http://avc.com/about/).

Read. Learn. Repeat.

3. The world is flat, but the entrepreneurial community is even flatter.

Most funds you pitch are going to turn you down – that is simply the math behind the game. But a no now doesn’t always mean no never. Learn something from the questions and feedback you get at every pitch. Never ever dis your local investment community because word gets around. 
Learn. Grow. Repeat.

A Closing Thought

“Frying-Pan Jack and I were in that camp, that's where he said to me, he'd been tramping since 1927, 'I told myself in '27, if I cannot dictate the conditions of my labor, I will henceforth cease to work.' You don't have to go to college to figure these things out, no sir. He said, 'I learned when I was young that the only true life I had was the life of my brain, (so) what sense does it make to hand that brain to someone for eight hours a day, for their particular use, on the presumption that at the end of the day they will give it back in an unmutilated condition? Fat chance!” 
- Utah Phillips

venVelo Accelerates Investment Activities in 2015

http://www.pr.com/press-release/614031

Enterprise Florida and venVelo partner to assist Florida small businesses

http://www.enterpriseflorida.com/news/enterprise-florida-and-venvelo-partner-to-assist-florida-small-businesses/#

Monday, January 12, 2015

Leading tech investor will support early-stage small and minority entrepreneurs

ORLANDO, Fla. – Enterprise Florida, Inc. (EFI) today announced that itsMinority and Small Business Entrepreneurship Capital (MaSBEC) program is investing funds from the Florida Small Business Technology Growth Fund (FSBTGF) in venVelo, a Winter Park, Florida early-stage venture fund. Through this investment, several Florida-based early-stage small and minority businesses within venVelo’s portfolio will receive much needed capital to help ensure their continued growth.

“Small and minority businesses make up a large portion of Florida’s economy and we’re happy that our MaSBEC program can assist them as they grow,” said Secretary of Commerce and president & CEO of Enterprise Florida, Inc. Gray Swoope. “Support like this helps small businesses within high-growth sectors in Florida get more of the help they need in order to succeed.”

The investment expands support within the stages of venture capitalism for target-industry businesses that are transitioning from seed to early stage and allows venVelo to continue supporting more Florida-based companies. Currently, venVelo’s portfolio consists of all Florida-based companies including flexReceipts, GENICON, Kairos, mCast Networks, Spectrum Bridge, Splyt, Thrive Ice Cream, Vigilant Biosciences and Zentila. venVelo was named the 2014 Tech Investor of the Year by the Metro Orlando Economic Development Commission.

“We welcome this direct investment by Enterprise Florida,” said Allen H. Kupetz, COO of venVelo. “These funds will contribute to venVelo’s 2015 goals of continuing to support our current portfolio, identifying new investment opportunities and building relationships across Florida with like-minded funds and angel networks.”

Funding for the investment came from the FSBTGF, which is managed by MaSBEC.

MaSBEC partners with outside organizations that provide small, minority, and entrepreneurial companies with training, development and financing options and assistance. Additionally, MaSBEC capital programs offer loan support, venture capital and small research, as well as development grants for submitting Phase I proposals through the Small Business Innovation Research program and the Small Business Technology Transfer program.

“EFI’s investment in venVelo will positively impact several Florida-based companies in high-growth sectors as well as Florida’s thriving economy,” said Bill Spivey, Vice President of Capital Programs for EFI. “venVelo shares EFI’s mission to help small and minority businesses grow and succeed, which means the return on this investment will likely be immeasurable for our state.”

The fund was created by the Florida Legislature to provide financial assistance to businesses in this state having high job growth and emerging technology potential and fewer than 100 employees. More information regarding the fund, including which businesses may receive assistance, can be found by visiting the technology fund statute page online.

# # #

Enterprise Florida, Inc. (EFI) is a partnership between Florida’s businesses and government leaders and is the principal economic development organization for the state of Florida.  EFI facilitates job growth for Florida businesses through recruitment and retention, international trade and exporting, promotion of sporting events, and capital funding programs to assist small and minority businesses.

About venVelo

venVelo, the premier early-stage venture fund in Florida for innovative companies seeking capital and mentoring, was launched in 2012 and quickly established itself as one of the most active venture funds in central Florida. It was named the 2014 “Tech Investor of the Year”. In addition to its investments, venVelo board members have been frequent speakers, panelists, and venture competition judges around the state. venVelo also has donated money to a variety of organizations working to develop the central Florida entrepreneurial ecosystem. See http://www.venvelo.com/ for more information.

Video: Business Model Canvas

The Silent Killer – The Company Your Community Never Created

http://www.bothsidesofthetable.com/2014/11/15/the-silent-killer-the-company-your-community-never-created/

by Mark Suster

I was at a dinner recently in Chicago and the table discussion was about building great companies outside of Silicon Valley. Of course this can be done and of course I am a big proponent of the rise of startup centers across the country as the Internet has moved from the “infrastructure phase” to the “application phase” dominated by the three C’s: content, communications and commerce. But the dinner discussion included too much denial for my liking.

I think startup communities being simple cheerleaders doesn’t help anyone. Those of us outside Silicon Valley need to make an effort to effect change not just wish for it.

At the dinner some of those arguing that Chicago has everything it needs now that it has built: GroupOn, Braintree, GrubHub and others and that it has “come along way” and “will never get the full respect it deserves just because it’s not Silicon Valley.” But I think this misses the point. I’m a very big fan of Chicago. I started my career at Andersen Consulting (now Accenture) so I went to Chicago many times a year for nearly 9 years. I then got my MBA at University of Chicago so I secretly pull for local entrepreneurs as long as they don’t make me visit in the Winter any more.

But no community can become complacent with the wins that it has. It’s not the great companies you build, it’s the silent killer of those that should have been build locally and weren’t. It’s the thousands of jobs that weren’t created but you don’t even know it.

Think about Facebook had it stayed in Boston. Could it have become the behemoth that it is today? Who knows. But I’ll bet the Boston community would take 50% of the success of Facebook built locally. And the truth is that successful startups beget more successful local startups, wealthy VPs who go on to build their next startups, etc. Even Mark has acknowledged moving wasn’t the be all, end all in this famous interview

“If I were starting now, I would have stayed in Boston. [Silicon Valley] is a little short-term focused and that bothers me.”

Boston is still a great tech hub. But wouldn’t it want to be great PLUS have Facebook?

We have similar stories in LA and most people don’t know it. For example, Lookout is a mobile security company that was founded by three talented graduates of USC. They started their company in LA but a couple of years after raising capital from Khosla Ventures in the Bay Area they ended up relocating there. A few years later they announced $150 million in a funding round at $1 billion+ valuation and areramping up jobs to secure their market-leading position. You could say the team would have gone North anyways. Perhaps – who knows? But I know with local funding and local support that’s certainly less likely.

And consider Snapchat – one of our hometown favorites as they’re based in LA (Venice Beach). Luckily for our community the founders decided they wanted to build their company in LA regardless of not having local funding from LA. That’s our great gain as Snapchat has also raised a lot of money at a monster valuation ($10 billion reported) and has been scooping up talented Stanford engineers and relocating them to LA. Locally we call it “the Snapchat effect.” The VPs of SnapChat will be LA’s great founders 5 years from now.

Silicon Valley is littered with startups where the founders were originally in LA. Klout was an LA company – sold for $200 million to Lithium. As was FarmVille (sold to Zynga) and many, many others.

Local capital matters. Local mentors matter.

That was my original idea behind Launchpad LA. I figured if we couldn’t fund every company locally we should at least embrace them as a community and show that we’re willing to mentor them whether they raise their money in town or not.

So what can a community do?

I often point out the story of when we raised our fourth fund a few years ago. I went to see several LP funds in Boston. At least twice I had conversations that went like this, “Yes. It’s true. Your fund performance has been great. But there’s also several great funds in Boston and while our first priority is to returns we have an equal responsibility to local funds and local jobs.”

LA public pension funds and endowments have historically been the opposite. I think government and community members need to understand that capital formation is an incredibly important part of economic revival. People often say, “Great entrepreneurs will build a community and the capital will follow.” I don’t see much evidence of that. I think it’s a combination of the two. It’s clear capital with no talent ends up having to travel to do deals. But talent with no capital is another word for migration.

And then there is public policy. Historically the City of LA has been hostile to startups. I’m reminded of LegalZoom who was founded in LA but moved it’s headquarters to Glendale and much of its operations to Austin, Texas. While LA was trying to impose archaic taxes on the firm and seemed to care less about its existence since it was a “startup” – the first lady of Texas welcomed them to Austin by picking up the CEO at the airport on his first visit there.  It’s no wonder hundreds of jobs migrated. Luckily since then we elected Mayor Eric Garcetti who understands the importance of startups and of technology and venture capital on job creation.

But we still need more funds. No – I’m not worried about the competition. We’ll win our fair share of deals. But when you remember the Snapchat effect you see that I gain even from the deals we didn’t get to do. I’m guessing the future leaders of Lookout will build companies in the Bay Area.

Communities can make a difference. I wrote about the awesome efforts of Cincinnati to stimulate its startup community and the role of Paddy Cosgrave in Dublin, Ireland as well the entire Irish business community, the IDA, etc. who woo businesses to put their headquarters there. I also covered the impact of Brad Feld in Boulder or Fred Wilson in NYC as observed from my keynote on a trip to Seattle, which I felt could have a huge boom if its elder statements embraced startups a bit more.

Don’t get me wrong. Chicago has made strides. The Pritzker Family has been very active and the opening of 1871 as an entrepreneurial hub is a great example. But my conversations with countless Chicago entrepreneurs suggests it has similar issues to all non-Silicon Valley centers: not enough venture capital, too few tech angel investors, not enough talent for product management or engineering, not enough local tech powerhouses to drive local biz dev / keiretsu. I think this is true of LA, NY and many other tech communities so I’m not singling out Chicago.

My point is this … cheerleading isn’t enough. We need to help create local venture capital funds who may be national in investment strategy (as we are) but who will do more than their fair share of fundings locally (for us that’s 50%). Fund formation + local mentors + local talent = a shot at creating successes that drive the future job growth of our great cities.

Revisiting the Tomato Plant Dilemma

Revisiting the Tomato Plant Dilemma*

The views expressed may not reflect the opinions of venVelo’s board or its investors.           

Many years ago, in a corporate training class, I learned about the Tomato Plant Dilemma.  Essentially, it goes like this:

You have 10 tomato plants, but only enough water for five.  Do you water each plant with half of what it needs to thrive and watch them all die a slow death while hoping for more water to arrive? Or, do you water five to make sure at least 50% make it?  Seems that the answer is pretty clear, yet smart, hard-working, persistent entrepreneurs often make the wrong choice.

Many entrepreneurs fall prey to the temptation of attempting to initiate multiple product lines out of the gate rather than focus on the product with the greatest potential, and for which there is funding support (i.e., water). I recently joined venVelo and have had the pleasure of listening to numerous pitches designed to peak our interest enough to invest.  A few have come in with the idea that they could support more than one product line.  Often, the idea would be that one easily launched product line, though limited in potential, would generate enough cash to help support the development of the real target product.  Seems like a great idea, right?

Whenever one of these opportunities was presented to us, some members of the fund – many of whom have launched and worked in more start-ups than I have – typically take the founder to task.  I am new to the game, so I usually keep to myself in these instances.  I always wondered what was so bad with the multiple product approach if indeed one product could be sold in the near term to support the other.

Well, now I have joined a start-up myself (not a venVelo portfolio company) and I see the folly first hand.  I would summarize the problem as one in which the executives leading the company may be guilty underestimating the challenge of raising market awareness with no brand value, the difficulty of developing distribution channels, the responsibility to manage invested funds carefully, and risking the success of their employees.  That may seem an awful stark statement, so let me elaborate.

Start with the devaluation of employees.  It is likely the new company has only enough funds to support a small team.  In charging that small team with trying to market, develop distribution, and sell multiple product lines, like the Tomato Plant Dilemma, they will not be able to give the attention to all that it takes to move product for one product let alone more than one. Like sharing the water among too many tomato plants, employee morale will die a slow painful death.

Similarly, in a start-up, cash is king.  When cash from investors is what is keeping the company operational, money should be spent as if “nickels were manhole covers.”  Yes, you have to spend money to make money, but when you are using other people’s money, you should keep returns on the horizon in mind.  When you try to support multiple products, no matter how honorable the intentions, you are likely to spend too much on supporting the lesser product, and cheat the business you are truly trying to create. There comes that pesky Tomato Plant Dilemma again.  Do I focus my limited financial resources on the true business, or do I risk wasting it trying to stand up an interim product?

Finally, when you have no brand awareness, and your product has limited proof of value in the market place, being able to develop distribution is typically a lot harder than it might seem.  This is true regardless of how good a mouse trap a start-up may have.  While it is true that 90% or more of start-ups fail, this is not saying that 90% of the products were inherently doomed to failure.  It is more likely that many failures were problems raising awareness and landing distribution.  You do not simply get the product packaged and go to QVC to see what you can sell, for example.  At a minimum, it takes money, the persistence of talented sales and marketing people, and a good helping of luck, to get most products off the mat.

So, my advice to myself and to other entrepreneurs is to focus on the product that you want to pin your future on.  Many things contribute to the success of an entrepreneurial endeavor, and focus is key among them.  Give the tomato plant with the most promise the water it needs to thrive.

*The author is a board members of venVelo, a venture fund and business accelerator in Winter Park, Florida focused on early-stage opportunities. Formally launched in 2012, venVelo quickly established itself as one of the most active venture funds in central Florida.