Archive for category English
It is shocking to see someone as smart as Fred Wilson say: “The venture industry is not broken, but some of the participants in it are.”
http://tinyurl.com/p2j6vb
Let’s take a look at this statement for a moment. The model of taking other people’s money and investing it into startups for 2% as a management fee and 20% as carry is not inherently broken. That’s like saying the model of selling hamburgers is broken. If everyone sold hamburgers that killed the consumers, then you could argue that selling hamburgers was broken. Similarly, the infamous “2 and 20″ model breeds widespread bad behavior and poor performance, which is essentially the same as being broken. So, how is it broken?
Well, most venture capitalists have started to optimize for management fees versus carried interest, or sharing in the profits generated. It simply makes sense to raise larger funds every two or three years so that each partner can earn $2 or $3 million a year in guaranteed fees. With exits taking longer and failures rampant, praying to generate personal returns from the carry after paying back your principle is unrealistic. Returns are too uncertain, and some funds have been unable to return the principle, forget profits. And, the math is clear: a 2% management fee over 10 years generates a little less than $50 MM in fees on a $250 MM fund. Meanwhile, a 2x return on a $250 MM fund also generates $50 MM in carry, yet the carry is a lot harder to get, takes a lot longer, and is much more uncertain than the fees.
Venture capitalists pump new fund money into the “flavor of the moment” industries at a staggering rate. The goal is to quickly empty out an existing fund to make way for raising a new fund and to start earning the management fees. Firms only earn fees on invested capital, creating an incentive to invest quickly in “hot” industries without much thought. This roulette table investment strategy, where everyone bets on an industry in a short period of time, barely worked with telecom and the internet, but it looks like an abysmal failure with Web 2.0 and cleanteach. It seems like “0″ and “00″ have come up back-to-back. There are many analogies to justify the roulette strategy, like the “rising tide floats all boats” or “safety in numbers.” You could also use the analogy: “lambs to the slaughter.”
Caring about the entrepreneur has become an afterthought, almost a myth. What firms care about is raising their next fund and returning the principle. It’s become a game. Return some principle, then raise a new fund. As a result, great entrepreneurs rarely go into venture capital anymore. It’s financial three card monte, not entrepreneurship support. Meanwhile, all of the junior associates employed in venture capital need career mobility. These business school jockeys were brought in to identify classmates as funding targets and to run complex capitalization table analysis. The next thing you know, venture firms are populated with b-school grads as partners, who, in turn, are hiring and promoting more b-school grads. Now there are a bunch of “career venture capitalists” with no idea on how to start or grow a company besides watching others from the sidelines.
If all of this were not problematic enough, the current venture capital model requires deal syndication to justify next round valuations, ensuring that many different firms work together, whether they like it or not. The problem is that behavior in a syndicate deal can only be as good as the best investor, and is likely to be just a little better than the actions of the biggest jerk. For example, if one partner in a deal is constantly trying to oust management and take over a company, it’s difficult for all of the other investors to fight this behavior. Even good investors with good intentions often take a back seat to the jerks, and they’re quick to write off a deal, while sipping cappuccinos brewed off the fat of their fees. Preferred voting rights and shareholder politics are so complex that jerks prevail.
So, Fred Wilson said that venture capitalists need to look at the entrepreneurs “as the client.” Essentially, he is saying that the model is not broken, just everyone is doing it wrong by focusing on the fees. Maybe the model encourages people to do it wrong, Fred. Wake up.
Google is developing an open-source operating system targeted at Internet-centric computers such as netbooks and will release it later this year, the company said Wednesday..
The Chrome OS will be available for computers based on the x86 architecture, which is used by Intel and Advanced Micro Devices (AMD), and the Arm architecture.
Prototypes of Arm-based netbooks began appearing last month at the Computex show in Taiwan and Google’s support for the architecture could give it a significant boost. Microsoft’s mainstream Windows operating system doesn’t run on Arm chips so many manufacturers were talking about using Linux or a version of Google’s Android operating system. It’s not immediately clear how much the two operating systems share in common code but Google said they are aimed at very different devices.
“Google Chrome OS is a new project, separate from Android,” it said. “Android was designed from the beginning to work across a variety of devices from phones to set-top boxes to netbooks. Google Chrome OS is being created for people who spend most of their time on the Web.”
While Google is initially looking at the netbook segment of the market it might compete with Microsoft and Apple on larger, Internet-centric machines.
Chrome OS is “being designed to power computers ranging from small netbooks to full-size desktop systems,” said Google.
The heart of Chrome OS is the Linux kernel. Applications, which can be written in standard Web programming languages, will run inside Google Chrome in a new windowing system. They will additionally run inside the Chrome browser on Windows, Mac or Linux machines, meaning that a single application could run on almost any computer.
Wide support for the platform will be key to getting developers involved and so an important factor in its degree of success.
“We have a lot of work to do, and we’re definitely going to need a lot of help from the open source community to accomplish this vision,” Google said in its blog post.
For end users Google promised a better computing experience on machines with faster access to e-mail, fast boot-up times, access to data from anywhere and the end of problematic hardware configuration, software updates and security issues.
“We are going back to the basics and completely redesigning the underlying security architecture of the OS so that users don’t have to deal with viruses, malware and security updates. It should just work,” Google said.
Chez Baker – May 13th 2009
May 18
Another Jam session!
6 Nations 2009
Mar 22
iPhone 3.0 firmware update
Mar 18
Apple just previewed the 3.0 update. It’s full of new features like, cut&paste, MMS, bluetooth P2P, App Push, Voice Memo and spotligth Search.
iPhone OS is really growing release after release. The update will be released on next summer. at the moment developers can download the 3.0 Sdk that have over 1000 new API like Mail API, Bluetooth, Sound etc…
Looking forward to this summer!
10 best Business for 2009
Mar 12
In their list of top 10 business opportunities in a down economy, John Assaraf and Murray Smith, founders of OneCoach, a provider of small-business coaching services, recommend the following:
- Business coaching: As employees get downsized, upsized or just plain sick of their jobs, more of them are starting their own businesses. You can be there to provide the coaching and mentorship they need to succeed.
- Social networking for business: Take advantage of the interactivity of social networking to connect with prospects and help other businesses do the same.
- Alternative fuels: Help consumers cut their energy costs with alternative fuels and products that boost fuel efficiency.
- Environmental services: It’s the greening of America, and it’s only just begun.
- Health care: People are living longer and need health-care products and services to help them maintain a good quality of life.
- Nail salons/beauty products: Think fewer facelifts and more facials. People will always tend to their appearance, even in a down economy.
- Discount retailers: Give people what they want at deep discounts, just as Wal-Mart and 99 Cents Only Stores do.
- Luxury products: Interestingly, yacht sales are up, as are sales of Prada skirts. There are still consumers with money who are willing to spend it.
- IT and technology services: Help business travelers cut the cost of flying with virtual meetings.
- Credit and debt management: Show consumers how to tighten their purse strings even further.
The usual rumors tell that a brand new Iphone is ocming. Somebody says June, other the next years.
Designer, but overall people with great fantasy are trying to find out what the new style will be. Here the one I like it more than others.
Raising money, VC or Angels?
Jan 26
Everybody know that if you wat to raise money for a startup you should ask them to Ventur Captalist Fund or to Angels. But what’s the real difference? When to aks to the first ones, and when to second ones? This article form entrepreneur.com should help you. The article has been written by Bred Feld an early stage investor.
As a venture capitalist, I get approached several times a day by entrepreneurs looking to raise money. One of my typical responses is, “You shouldn’t be talking to me; you should be targeting angel investors.”
The source of this confusion varies: Sometimes it’s a misunderstanding of the different roles and expectations of a venture capitalist vs. an angel investor. Other times it’s a lack of clarity on the part of the entrepreneur regarding what he or she wants to accomplish with both the business and the financing. Regardless of the source of the confusion, here are a few guidelines for determining whether you should be approaching venture capitalists or angels for your financing.
- The amount of money you’re raising in this round: If you’re raising less than $1 million, you’re likely wasting your time targeting venture capitalists, with two exceptions: 1) you specifically target funds that do seed rounds, or 2) you have a preexisting relationship with a VC firm and want to put together a seed round to get going quickly.
- The total amount of money you’re looking to raise over the life of your company: If you think you can get your company to a point where it’s cash-flow positive on less than $3 million, stick with angels.
- The type of company you’re building: Venture capitalists love to fund businesses with the potential to be enormous. Angels love this, too, but they’re much more willing to fund smaller companies that will presumably require less capital. In addition, most venture capitalists want to fund businesses that have clearly defined economies of scale (such as software companies) vs. ones that scale linearly with some factor (such as service companies).
- Your experience: Successful serial entrepreneurs always find it easier to raise money from venture capitalists. If you’re a first-time entrepreneur, that doesn’t mean you can’t raise VC money, but you’re going to find it more difficult than an experienced entrepreneur will.
- Your network: If you’ve never met a venture capitalist before and none of your colleagues have built companies with VC funds, you’re at a disadvantage by having to start from scratch. In contrast, if your best friend’s father is the CEO of a Fortune 1000 company, you have a good shot at quickly getting plugged into a powerful set of angels.
As with all guidelines, there are plenty of exceptions. One seems to hold in most angel financings: the rule of thirds. A third of your financing will come from one investor, the second third will come from a set of people following that investor and the last third will be random. So make sure you go hunting for your lead investor.