Consultiq

Patience and Venture Funding

0 | January 26th, 2012 | Posted in business strategy, venture capital

Patience and persistence remain necessary attributes for successful entrepreneurs seeking venture capital funding, according to a 2008 paper titled, “Performance Persistence in Entrepreneurship,” (Gompers, Kovner, Lerner, and Scharfstein), available online from Harvard Business School.

Even seasoned serial entrepreneurs wait an average of 21 months before they obtain first-round funding compared to 37 months for first-time founders, the authors said. The paper provides a number of other useful comparative measures against which entrepreneurs may judge their performance.

While the paper did not indicate when the clock began to run on these funding timeframes, it’s clear that waits shy of two years to over three years are longer than many of the expectations I typically hear today from founders in my consulting practice, or that I heard when I was a founder in my own startup. They also contradict the “word on the street” voiced by many around Silicon Valley.

The stark reality of VC funding availability underscores the importance for founders in obtaining adequate early seed funding to sustain their venture’s operations until the venture matures sufficiently to gain VC investment support. On the flip side of that observation, it also means that getting to revenue and profit is a cornerstone attribute, and remaining in “development paralysis” to create the perfect product vehicle only delays the moment when VC funding will be forthcoming.

Despite these facts, many founders dawdle over their alpha and beta products’ features, nuances, and non-essential elements, trying to get them exactly right before finding customers, putting their product in front of them, and asking them to pay to buy it. What’s better: a venture with the perfect product that ran out of money before it obtained traction, or one with a minimally viable product that attracted paying customers and obtained the VC funding needed for product perfection and rapid growth?

Kicking off a startup is hard enough when the founders do everything right. It’s downright challenging when one chooses to ignore the history of others and charts one’s own path against track records typical of those found in the middle of the bell-shaped curve.

Robert Dolezal, CEO–Consultiq

Missing the Obvious

0 | January 23rd, 2012 | Posted in business strategy, recommended reading, venture capital

A whole book was written about so-called Black Swan events—blindsides that no one saw coming. Its message: “Besides anticipating the obvious, be prepared for things you never dreamed could possibly happen.” Real-world examples: The Japan and Indonesia quakes and tsunamis. The fiscal meltdown that caught Euro countries with their balance sheets in tatters. The cloud. Facebook’s dominance of social networking. And the list goes on.

Unanticipated events, challenges, and their consequences roil our everyday lives. Yet we are inexplicably blind to real threats to our ventures and livelihoods. In last week’s news headlines, we learn that Eastman Kodak, once a Fortune 10 market leader, fully anticipated the impact of digital imaging on its core business 20 or so years before the threat came to pass, yet failed to respond and adapt with meaningful change. It just filed for bankruptcy protection. Why?

A core reason is the inability to hear the market through the cone of silence and positive affirmation we managers erect in our leadership team, advisors, and company cultures. As founders of early startups frequently realize too late, the blind 500-lb. gorilla that is ignoring our market can suddenly surprise us with an overwhelming rifle-shot focused on our opportunity. Conversely, we fail to see, hear and anticipate what the consumers’ fickle tastes now want, what our key competitors are doing to thwart our expectations, or how business conditions have changed since we first hatched our ideas. We are too deep in our code, too busy crafting the perfect elevator pitch, too oblivious to early customer feedback, too blind to pivot when we desperately need to do so.

Looking over the horizon is an acquired skill. It’s not reading tea leaves, gazing at crystals, or reading the Tarot. It’s a never-ending quest to listen to and evaluate the views of those outside your inner circle, spanning wide ranges of expertise, skillsets, and subject areas tangental to your core interests. If you have your head down working in network infrastructure, you may be surprised to learn about developments in intellectual property or nano science that will rock your boat. If you have a shallow network, it’s a cinch that you’ll only be able to predict within a narrow window of perspective.

So what advice can I share? Take advantage of those panel discussions, meetups, networking events, beer-and-bull…. sessions—they’re held nearly every night of the week somewhere close to where you work, live, or commute. They are mainly low-cost, and they’re extremely valuable even if you only make a single new contact or hear a lone piece of information that fits into your picture. In many cases, you’ll gain several. And don’t limit your participation to groups in your narrow focus area. Take advantage of the opportunity to intersect your focus with other elements of the marketplace and triangulate to see possible paths the future might take. Then test your hypotheses by asking your network what they think. Build strengths on strengths.

Sure, you may be trying to finish your beta and pulling 18-hour days-nights. Or, you may be watching your run rate converge with your bank account hitting zero and trying desperately to raise a new round. How can you take time away from those things to rub elbows in a noisy bar or meeting room with a bunch of people interested in something you know nothing about? Well, ignore the advice at your own peril.

Whatever you are doing, look up, look out, and listen. There’s no need to be blindsided roadkill. You have a wide circle of advisors to expand your ability to see your possible futures from your single pair of eyes to their many. Ask.

Bob Dolezal—Consultiq’s CEO and strategy expert

ComScore Says 31 Percent of Ads Delivered Were Never Seen by a Consumer

0 | January 23rd, 2012 | Posted in internet marketing

A U.S. based study of 12 national premium brands sponsored by ComScore says that 31 percent of ad impressions measured were never seen by a consumer and that in-view percentages ranged from 7 percent to 91 percent.

Now, ComScore conducted the study as part of its promotion of its Validated Campaign Essentials product, but the numbers bear examination, because the promise of digital advertising has always been better targeting and better measurement.

ComScore said they studied 12 national brands, 3,000 placements, 381,000 domains and 1.7 billion ad impressions, across advertisers such as Allstate, E*TRADE, Kellogg’s, Kraft, Sprint and others.

According to the results, an average of 4 percent of ad impressions were delivered outside of the target geography. At the high end, the mis-targeting ran as high as 15 percent on individual campaigns. In many cases, ComScore reports, ads were served in markets outside of those where the product is sold.

This calls for not only better auditing and measurement tools, but also better IP address geolocation services. If AT&T reports all their consumer DSL IP addresses as living in Richardson, Texas, it’s going to be hard to target their customers outside of Richardson.

ComScore said that 72 percent of the campaigns studied had some ads running beside “unsafe” content as determined by the advertiser, but they didn’t say how many impressions that represented out of the total. Still, better tools are needed to characterize and qualify sites for delivering ads. ComScore’s study highlights not just the need for auditing, but for better targeting tools as well.

Also interesting is the overabundance of of ad inventory, which is effectively limitless. “The display advertising market today is characterized by an overabundance of inventory, often residing on parts of a web page that are never viewed by the user. This dilutes the impact of campaigns for advertisers and represents a drag on prices to publishers,” said Dr. Magid Abraham, President and CEO of comScore. “Conversely, some ads below the fold are quite visible and deserve more credit.”

Aside from auditing, this tells me that advertisers need to think more, and investigate more, about their ad placements, almost on a site-per-site basis.

Use Surveys to Build Content

0 | January 19th, 2012 | Posted in internet marketing

“Start a blog,” the internet strategists advise. But that’s only the beginning, not the ending. Where is the content going to come from on a regular basis to keep the content fresh, and the search engines coming back? Online surveys of your customers and prospects is an easy way to generate meaningful content, not only for your corporate blog, but for the website itself.

Market surveys are nothing new, of course, but online survey tools have proliferated in recent years, and their capability and power has grown too; one can now easily arrange telephone surveys through online survey services.

But who to survey, and what to survey them on? The annual best-practices benchmarking survey of your existing customer base is a good place to start. Offer participants a chance to see aggregate survey results to entice them to participate. The questions, obviously, will be particular to your product or industry, but try to keep it short enough that people will actually respond, and follow best-practices for surveys (no leading questions, no push-poll surveys, etc.) to produce results that are meaningful and useful, for yourself, and participants.

General market research surveys can produce useful content too. When designing surveys, give some thought to which questions can be used to generate public facing content in addition to guiding internal direction or strategy. Much of what you learn will be useful to customers and prospects, and it doesn’t mean you have to give away the jewels of your dataset. (And anyway, success is about strategy execution, not keeping your strategy secret.)

To build depth in the information you gather, think about how to screen participants in an initial, qualifying, survey, and identify those participants who self-identify or otherwise qualify for a longer in-depth survey. Look for criteria to identify willing participants in those longer surveys, and participants likely to have the answers to your questions.

Also look to how you can implement a cycle of surveys – plan for annual benchmarking surveys to actually take place annually. Create a calendar on which you can plot surveys on a quarterly basis. (Or some manageable periodicity.)

Content creation can be a slog, but with some planning and forethought, and the latest in online survey tools, it can be made a little easier.

Forum: Life for US Cleantech after Solyndra

0 | January 10th, 2012 | Posted in cleantech, venture capital

SVForum is hosting a forum in San Ramon, CA, next week on the future of cleantech in the wake of the Solyndra debacle.

Venture Capital: Unsustainable Exuberance?

0 | January 6th, 2012 | Posted in business strategy, recommended reading, venture capital

Venture capital funds are on an unsustainable path.

In the past two years, venture capital funds invested US$24 billion more than they raised in new funding. In 2010 alone, they invested $26 billion against raises of $14 billion, nearly a 2X deficit. Contrast this with IPO statistics: in 2011, approximately 50 VC-backed firms went public compared to 75 in 2010—and 2010 was not a peak year for VC-backed IPOs. CALPers, host of the California state employees retirement megafund, has cut back its allocation to VCs from 8% of its alternative pool of funds to 1% it will make available for VC investment. What’s going on?

A recent Wall Street Journal article (Some Venture Funds Hit ‘Pause’ on Big Deals) quotes super-Angel Mark Andreessen as saying he has “taken a step back” from high valuation deals and is now turning his focus to those where “pricing is still under control.” How do you say, “repeat of the bubble,”—at least among those of us old enough to have lived through it?

Putting a bet on the table has become a high stakes game at the same time as lots of young startups have stars in their eyes after seeing Reid Hoffman cash out big on LinkedIn and licking their chops over estimated valuations for high profile names like Facebook. There’s just one problem: as more and more startups are reaching the critical A-round and expansion B- or C-round funding stages, investors are looking at their prospects for making above-T-bill returns from high-risk venture capital investments, shaking their heads, and putting their money in other investment categories (or holding it in cash reserves to await a clearer economic picture).

This portends a wind-down is in the offing, and some solid performers may hit a stone wall just when they need to accelerate their growth with cash infusions. As for the weak ones? Uh-oh.

Word to the wise: if you are presently in the game with a venture, take steps now to line up your rounds and reduce your run rate or otherwise polish your margins. Delay new initiatives, defer those that are non-essential, and find non-cash paths to continue operations through the funding drought.

Batten down the hatches, sailors. It’s looking like those easy voyages to high-valuation funding are being postponed and a maelstrom of stormy times are in the offing for those with ventures underway.

M&A Outpaces IPO in Fourth Quarter of 2011

1 | January 3rd, 2012 | Posted in venture capital

According to a release today from the National Venture Capital Association, fourth quarter M&A exits outpaced IPOs by more than eight times.

Free Shipping Day Sees Over $1 billion in Online Retail Spending

0 | December 19th, 2011 | Posted in internet marketing

Yesterday, comScore released the most recent data on 2011 Online Holiday Shopping. U.S. consumers spent $1.07 billion online last Friday, known as “Free Shipping” Day.

Four days last week saw online spending top $1 billion; so far this holiday season, comScore says, consumers have spent $30.9 billion online, a 15% increase over the corresponding period in 2010.

comScore expects Cyber Monday spending to rank as heaviest online spending day this year, repeating that day’s performance last year.

“More than $1 billion in spending on Free Shipping Day put the exclamation point on what will almost certainly be the heaviest week of the online holiday shopping season,” said comScore chairman Gian Fulgoni. “Four individual days surpassed $1 billion in spending this week, with Green Monday leading the way at $1.13 billion. While next week may see another strong day or two at the beginning of the week, it’s clear that we have now reached the crescendo for this season and that spending will begin to slow as we get closer to Christmas, leaving Cyber Monday as the top ranked shopping day for the second year in a row.”

An analysis of e-commerce transactions by comScore shows the percentage of transactions last week with free shipping reached 56%, almost four percentage points higher than the same period last year.

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Between a Seed Round and a Hard Place

0 | December 15th, 2011 | Posted in business strategy, Consultiq, recommended reading, technology, venture capital

It’s said that times have never been easier to get a startup off the ground. Between cloud infrastructure and efficient programming tools, ideas become reality in record time at low expense. We’ve seen a bevy of new startups take that path, perhaps fueled by a successful serial entrepreneur, a friends-family seed round, or an early angel. Sometimes, it was just the founder working on his/her own with a friend or two, keeping a day job and betting on a successful outcome.

But what happens when those ideas are cast in stone and fundable? Experts at the National Venture Capital Association conducted a survey in conjunction with Dow Jones & Co., and found that almost 75% of U.S. startups plan to raise a traditional A round or a mid-size angel debt round in the coming year. Unfortunately, they will be asking for critical growth funds just as VCs experience a severe capital shortage.

The survey reports that 69% of VCs expect their investments to stay the same or decline next year, not grow. That’s a 21% increase from a similar survey last year. Add to that sobering statistic the fact that VC firm numbers are in double digit decline, from 1,312 in 2000 to 844 last year. Their numbers dropped nearly 5% in the past 12 months.

Last month’s SVASE-East Bay Series focused on what categories are expected to be hot for VCs–medical, hardware, and non-traditional (read: not high tech software or eCommerce) startups headed the list.

What does this mean to startups on the verge of an A-Round quest? Hard to say. We also heard that good ideas that proved out were not seeing a cloud of competitors emerge around their premise, as was often the case in earlier years. So a startup with that elusive “traction”—customers, revenue, and (gasp!) profit margin—may well find their way to growth and expansion funding. Those with less to show may be forced to close their doors, and that’s not good for our now-famous innovation economy.

Online Holiday Spending Up 15% Over Last Year

0 | December 12th, 2011 | Posted in internet marketing

comScore is reporting that online holiday spending for the season-to date is up 15% compared to the same period last year, at $24.6 billion.

The week ending December 9th alone saw $5.9 billion in online spending.

“The most recent week of the online holiday shopping season saw growth rates remain in line with the season-to-date at 15 percent and three individual spending days eclipse the $1 billion threshold,” said comScore chairman Gian Fulgoni. “These highlights represent another very positive sign for the holiday shopping season, as the week following ‘Cyber Week’ often experiences relative softness in spending momentum due to retailers pulling back on their promotional activity. As we enter what will be the heaviest week of the season for online retailers – beginning with ‘Green Monday’ on December 12 – all signs are now pointing to a strong finish to the season.”

Cyber Monday, “Green” Monday (today), traditionally a big spending day, and Free Shipping Day (this Friday, December 16th) will duke it out for the #1 spot in online spending for the 2011 season.