Thursday, December 13, 2007

A New Market Crash

I don't pretend to be a financial wizard, or someone who follows the market on a daily basis. I rarely watch C-Span and occasionally login to my Ameritrade account.

However, I do have a point to make about markets and how it relates to the small (new) business of entrepreneurs.

About six years ago, when the technology market crashed, it was a tough time for a lot of entrepreneurs, and in looking back a lot of good things came out of the boom that changed the world (Google, eBay, etc), but a lot of entrepreneurs sufferred tremendously and many lost everything.
Now we are looking at the same type of impact on the economy with the recent Real Estate crash, but for some reason it feels different to me.

When innovative (small) businesses die - the best an entrepreneur / Investor can hope for is a write-off on their taxes. When the real-estate values drop the entire government mobilizes and tries to find ways to reduce the burden on banks and the overall market by lowering interest rates, writing off loans and shifting policies. It seems a little odd, that our "innovation" economy doesn't get the same type of attention when markets dip?

I know what you are thinking "Its different... because starting a new business is part of capitalism and there is assumed risk - the government should not be there to bail you out"

I agree - starting a new business is risky, and the governement shouldn't bail out the entrerpreneur - but in the same breath - realize most of the real estate crash is due to "investors buying over-valued real estate". How is this different? It is still buying stock in an asset, and trying to profit from the sale. Sounds like a business to me.

Don't get me wrong, I am not asking the government to bail failing businesses out - but what I am asking is for entrepreneurs and early-stage investors to be given the same level of relief that we are seeing in the Real Estate aftermath.
What about finding ways to encourage more early-stage investment in companies and ways to offer "relief" through taxes for entrepreneurs who risked their money and lost it in a new venture.

What about lowering the tax burdens of entrepreneurs who provide a sole income to their family, or invest in new companies to grow the economy?

I am not claiming to have all the answers - but I find it a little odd that when the real estate market crashes the President and Congress get out of bed the next day and scramble to find a way to lessen the burden on Corporate America - but when the Innovation Market crashes - they let the entrepreneur and small business owner take the hit.

Saturday, August 18, 2007

Here is the Committee for the Opportunity Fund???

First, let me say - that all of these guys chosen for the Florida Opportunity Fund are very successful, and I am sure very bright. However (with all due respect) - are they the right people to make decisions about where "Early Stage Venture Capital" should go in Florida?

Here is the committee:

Jeff Lyash - Energy Executive
Jeff is an executive at Progress Energy, and has worked with Nuclear Power Plants his entire career according to his bio. No clear Startup or Entrepreneurial experience.

Alan Becker - Lawyer
Alan is a very successful lawyer - with expertise in International Law. Lawyer his entire life. No clear Startup or Entrepreneurial experience.

Cyrus M. Jollivette - Health Care Executive
Cyrus' entire career is in Public Relations with Government and Universities. No clear Startup or Entrepreneurial Experience.

Tim Edmond - Real Estate
Tim has developed real estate for 27 years. No clear Startup or Entrepreneurial Experience.

Medhi Ghomeshi - Banker
Medhi is a banker. No clear Startup or Entrepreneurial Experience.

So basically, no one that has run a VC firm, no one that has started and grown a successful startup, and no one who has embraced innovation and risk.

One could argue that Energy, Real Estate, Law, Banking and Health Care are "high risk" ventures. But that person would be wrong. Dead wrong.

Five members to pick decision makers for VC Fund

This is an article just released by Tampa Bay Biz Journal. You can see my comments below.

Five members to pick decision makers for VC Fund

Tampa Bay Business Journal - 5:23 PM EDT Friday, August 17, 2007
by Danielle Randall

The first state-backed venture capital fund has adopted a committee.
Enterprise Florida Inc., the state's economic development and retention organization, is in the midst of creating a Florida Opportunity Fund. The fund will invest $30 million of its total of $35 million to invest seed capital and early stage venture capital funds.

Tom Kuntz, vice chairman of Enterprise Florida's board and chairman, president and CEO of SunTrust Bank Inc. (NYSE: STI) in Florida, appointed five existing EFI board members to serve on the committee during this week's board meeting.

The committee members are Jeff Lyash, president and CEO, Progress Energy Florida Inc., Raleigh, N.C.; Alan Becker, senior partner for Becker & Poliakoff, PA Fort Lauderdale; Russ Jollivette, senior vice president of public affairs, Blue Cross/Blue Shield Florida, Jacksonville; Tim Edmond, president of CNL Realty & Development Corp., Orlando; and Medhi Ghomeshi, president and chief executive officer of Great Florida Bank, Coral Gables.

These committee members do not exactly seem like entrepreneurial businessmen, considering each of them work for large companies that do not likely work with startups, said Rich Swier, founder of Sarasota-based StartupFlorida, which has an investment concentration in the Tampa Bay region.

"They're executives and bankers, and I don't believe any of these people are rubbing elbows, or working closely with early-stage venture capitalists," Swier said.

During the next three months, the committee will cherry pick a list of potential decision makers for the Florida Opportunity Fund. Its short list of candidates will be voted on at Enterprise Florida's board meeting Nov. 15.

The Florida Formation Act was enacted July 1 in an effort to fuel the economic development of startups and venture capital investments in Florida. As part of the legislation, the Florida Opportunity Fund will be established as part of the legislation and will earmark $30 million of its $35 million to in invest in seed capital and early stage venture capital funds. These investments would not go directly to individual businesses but would be comprised of a partnership with private venture capital funding, or through a fund-of-funds investment approach. Fund-of-funds is a vehicle designed to invest in a diversified group of funds.

Friday, July 20, 2007

Update on the Florida Opportunity Fund

See a recent article in Red Herring -
Florida Woos Venture Capital
$35M bill seeds university spin-offs, sets up VC “one-stop shop,” matches VC dollars in new fund. By Ken Schachter

It looks like the Governor passed the bill, and now Florida has 35M to help entrepreneurs.

After reading this article, and the quotes from the people involved - I am a little confused.

EXCERPT 1: "Use of Funds"

"The new law allocates $30 million for a fund of funds. The state will match VC funding dollar for dollar as long as it’s directed toward Florida companies. VCs are free to invest in out-of-state companies, but they won’t get matching dollars. "

My Comment: Are they serious??? They are going to use most of the money to "co-invest" with Florida VC's? What good will this do? 30 Million dollars is NO MONEY to the VC community - and (by the way) we don't have any VC's in Florida. Makes no sense?


"About $4 million will go toward early stage gap funding to turn research at public universities into spin-off companies. "

My Comment: I have personally launched 10+ companies (Some from universities and some from entrepreneurs) - and 4 Million will get you 4-5 companies maximum. So essentially, each university can count on 1M of this fund, which may help 1-2 companies. My Angel fund invested more money in companies in Florida.


"Roughly $1 million will go toward creating a “one-stop shop” where venture capitalists can go to survey potential portfolio companies"

My Comment: I hope this is a joke. This proves to me they really have no clue of what is going on in Florida. The problem is "We have no potential portfolio companies". Why will it cost $1 Million dollars to rent an empty room?

Saturday, July 07, 2007

Florida is ignoring the Entrepreneur

Over the past years, I have been pushing my agenda to build a more entrepreneurial spirit in Florida (specifically Sarasota and neighboring communities). My investment of time and money in starting an incubator and angel fund was partly motivated by diversifying our economy and trying to build momentum that the local governments and universities could follow.

When my efforts began, I thought Florida had all the elements of an pre-70's California (before it became the center of universe for entrepreneurial activity). We have great weather, a friendly business environment, a growing base of wealthy investors and three or four universities that are transforming into true research centers.

Case in point here is a recent study by Money Magazine

Florida - Entrepreneurs per 100,000 people: 280
South Dakota - Entrepreneurs per 100,000 people: 310
New Mexico - Entrepreneurs per 100,000 people: 450

How on earth does South Dakota have a more entrepreneurial economy?

See whole study -

So what is lacking? Why can't Florida become a leader of the next generation of great companies?

Here are my thoughts:

1. Our government is being run like we are still in the 80's. We focus on tourism, real estate and thinking "big industry". And what is ironic - is that we invest millions (if not billions) in these three pillars of economic development, and we have very little to show for it. Our real estate is in shambles, with inflated taxes, insurance and bordering a real estate crash. Our tourism industry has been flat and slowly declining over the past few years due to hurricanes and other unfortunate events. And "big industry" has always been a blue bird mentality, trying to get big companies to relocate to Florida is unreasonable - we don't have a strong (Technical) resource pool and "big industries" are dying and not aggressive anymore. Big Industry is down-sizing and trying to find new business models to grow into. The last thing they are thinking is relocating to save a little money on taxes. If anything they are relocating to India, China and Mexico to reduce their burden, not Florida.

2. Our government doesn't show leadership. We expect Venture Capitalists, entrepreneurs and other key people to just migrate to Florida because we have no state income tax and nice beaches. We show no leadership of taking the "risk" ourselves, so why would anyone assume 100% of the risk of transforming Florida into an Entrepreneurial State? We ask VC's to open offices and invest in Florida companies, but Florida itself invests most of its money in VC's out of state and in investments out of state? Is that really consistent?

3. Our Universities are not fueling our economy. Over 3 Billion dollars goes into Florida universities for research, yet the output of quality companies that are being launched from this research you can count on your two hands. It is not the responsibility of our education system to launch companies, but it is the responsibility of our education system to adapt to market demands, and researchers should be producing intellectual property that has relevance to improving our society, and driving their research toward commercialization. Research universities like Standford are a prime example on how they drive research toward the market. Universities need to support the process of commercialization as part of their research and development efforts. For so many years Universities just assume their research would be licensed by the big companies, and that trend is dying. Big companies are no longer willing to buy half-baked technology - they want market-proof.

4. Our Local Economic Development efforts are not investing in the future. It seems every project I read about being launched by Economic Development organizations around the state are very reactionary and short-sited. Nothing seems to be tied to a long-term plan. Even when they hire consulting firms to come to the region and put together a 300-page report on how to improve the local economy - they don't put in place the necessary resources and capital to make it happen.

I hope that over the next five years, our leadership in government (state and local) and our university system realize that ignoring the entrepreneur is the absolute worst thing that you can do to an economy. Everything around us exists because of entrepreneurs, and 90% of our economy is driven by the fruits of labor of entrepreneurs in the past.

The State of Florida needs to shift away from basing its economy on its sunshine and land - and become a creation-based economy. If we do not start supporting the creation of new ideas, new products and new companies - this State will continue suffer from economic paralysis.

Friday, June 08, 2007

What is Venture Creation?

"Venture Creation" is a model for starting ventures and bridging the gap between an "idea" and a "capitalized business". Since most Venture Capitalists will not invest in a venture unless it has great management, great market, great product and revenue, it is difficult for great ideas and great technologies to get to market.

Over the past 20 years, Venture Capital has slowly shifted to the right (becoming more conservative). The primary driver has been the exponential increase of density and volume of venture capital in the 90's. Venture Capital firms went from raising 250M to raising 2B in funds to invest (so now they are forced to invest more money per deal - thus later stage is the only option). The number of Venture Capital firms has grown exponentially, but the footprint of their location didn't change much. Most of the VC's are still in California and Boston. This shift to the right has widened the "GAP".
In the late '90's due to the widened GAP - Angel Investors (individuals that invest in early-stage ventures) started to fill the void that Venture Capital left behind. Over the past few years, Angel Investors have formalized their activity into Angel Funds, and now act and invest like early-stage VC's. Although Angel Investors have helped entrepreneurs survive the GAP and ultimately position for institutional investment from a VC - they have limited capacity in both time and money to really make qualified decisions and also assist their portfolio in operations and extended funding requirements. Angel Funds are typically run by one administrator or a volunteer angel investor who orchestrates the meetings.

On the other side of the GAP, Universities are struggling to get their technologies to market, and entrepreneurs are lacking guidance on how to get their idea to market. In order to help bridge the GAP, Universities formed Licensing Departments to help organize their IP and enable the professors to streamline licensing their IP to 3rd parties. Some Universities invested capital into building "incubators" and had dedicated staff to help qualify technologies, write business plans and offer some basic infrastructure for companies to hand their hat.

As you can see in the diagram above, the GAP has some awkward holes even with angel capital and incubation. The bottom line, is that money and infrastructure support companies, they do not create companies.

Thus, you need Venture Creation.

Venture Creation is a process. Much like a manufacturing process, Venture Creation turns raw material (e.g. technology) into finished product (e.g. fundable venture).

The value of Venture Creation is not just creating ventures, but more importantly qualifying ventures through a process that will determine whether a venture has a viable product, growing market and a plan that is achievable with existing resources and capital.

In order for the billions of dollars in research and development to bridge into the billions of dollars in institutional Venture Capital - there needs to a be a strong bridge in the form of a Venture Creation company to accelerate ideas into ventures, and build value.

The most important aspect of a Venture Creation company is the management. The people that work day-to-day with the portfolio of companies needs to be highly qualified, entrepreneurial people. The core principal is based on finding very valuable resources and sharing them across multiple ventures being launched.

The second most important aspect is the ability to invest capital. A Venture Creation company can have a small seed fund, or an affiliation with an Angel Group. Either way, having funds available from seed investors is needed.

The final component of a Venture Creation company is that is must have equity in ventures it helps build. Most of the motivation for helping businesses start and become successful is having an equity stake in the venture.

When looking at the funding cycles of any new venture, you need to be creative on how the funding will occur from Seed to 1st Stage.

Sunday, May 27, 2007

State of Florida is considering funding Venture Capital

The State of Florida is putting together a bill that would put together a substantial amount of funding to distribute as fund of funds to local VCs and funds.

Here is a snippet from the proposal

"This bill creates the Florida Capital Formation Act, which is designed to increase the amount of venture capital investment in Florida. The bill creates the Florida Opportunity Fund (fund), to invest in seed capital and early stage venture capital funds. The investments may not be direct investments with individual businesses, but must consist of partnerships with private venture capital funds (the “funds-of-funds” approach). Enterprise Florida, Inc. shall facilitate the creation of the fund. The fund shall be organized as a private, not-for-profit corporation under chapter 617. Enterprise Florida shall select a five-person appointment committee; this committee will select a board of directors for the Florida Opportunity Fund. The board shall select a Florida Opportunity Fund investment manager. The bill requires one dollar in private match for every one dollar the state invests; in addition, investments must be made in Florida-based businesses in life sciences, information technology, advanced manufacturing processes, aviation and aerospace, and homeland security and defense."

I personally hope we get the right bill passed. There is clearly a need for the State to help with economic development - especially new technology startups.

However, I am not sure these funds will end up in the right hands. The State of Florida has tried a few times in the past to fuel venture investments and it failed. One of the reasons I feel that past efforts were not successful is because they gave money to Venture Capital firms who had no experience in early stage investing, no experience in commercialization and no experience in building companies from the ground up.

If the State of Florida wants to ensure it's money is going to make an impact - they need to focus their attention on creating a "gap" fund. In Florida, there is a gap between the funding of research and development of technologies and actually raising a venture capital round of capital. Typically this gap is filled by angel investors because venture capitalists avoid early stage investing.

Let me put some perspective on the issue in the State of Florida. The major universities in the State of Florida receive over 2 Billion in research grants to develop new and innovative technologies. There are only 4 active angel funds in the State of Florida (one of which I founded) that make 2-3 investments per year. There is only 1 early stage VC in the State that I would classify as early-stage (Inflexion). Do you see the problem?

Here is a slide from a presentation I did at the Tech Transfer seminar for Florida.

To download the whole presentation click here.

So the question is where can the State make the biggest impact? I don't believe it can recruit outside VC's to open offices and look at Florida as a legitimate source for good deals - because we don't have a consistent flow of mature deals for VC's to consider. We have lots of interesting technologies floating in the halls of the licensing departments in our universities, but no real system for commercializing the technologies and creating companies.

I call this "Venture Creation". A colleague of mine was one of the father's of venture creation. Mike Buffa stated Milcom in the early nineties as a Venture Creation company that focused on taking raw technologies out of major corporations and spinning them out to create companies. The process of venture creation is complicated, but with the right people in place and the right funding in place it can be a powerful tool for economic development.

I modeled Startup Florida after Milcom, and started my own version of a Venture Creation company. Instead of licensing technologies, we had a team of people who looked for interesting markets and technologies and we launched our own ventures. For example - Movo Mobile was created after I met with a couple guys who had some experience in mobile marketing space and wanted to launch their own venture. We "incubated" the idea, created the technology, accelerated the idea through our Venture Creation process, and had launched a company in less than six months.

Why does Venture Creation work?
Simple. The people. A Venture Creation company is essentially a group of experienced entrepreneurs and investors who can work together to help launch new ventures. Unlike a venture capitalist, a venture creationist gets hands on in a venture, brings their expertise and helps accelerate the launch. After a venture is launched, management is brought on board to run the company and funding is brought in from angel investors or potentially venture capitalists. Many times ventures fail because they lack resources, knowledge and the network to grow a business. Venture Creation brings all those elements to the table on day one, and you can focus on building the business.

How does it work?
Simple. A Venture Creation company looks for innovating technology and experienced entrepreneurs. Once a technology or entrepreneur is located, it analyzes the market opportunity for the idea and decides whether or not to proceed to create a company (I am over-simplifying the process, but essentially this is a big step). The Venture Creation company licenses the technology (which already may have millions invested through R&D grants, etc) and creates a company. The company is accelerated through a venture creation process, business plan is executed, management team is formed, application is built and the company is launched.
Essentially, the venture creation process bridges the "gap" and brings real investment opportunities to the table - for Venture Capitalists to consider (both from Florida and outside the State of Florida). For example, most of Milcom's ventures were located in Florida, but received funding from top tier Venture Capital firms from all over the US and World.

What about the lack of Venture Capital?
The obvious question is "great, you helped create companies, but they still need money - what can we do about the lack of venture capital?"

Venture Capitalists will find good deals. Deal Flow is the life blood of venture capital, and most VC's starve for good deal flow. The reason VC's are not setting up shop in Florida (which by the way is one of the top green fields for technology innovation in the country) is because it lacks deal flow. A Venture Creation company would create deal flow, and leverage the massive amounts of R&D investments our Universities are making, and bring to the surface a vibrant entrepreneurial community. No matter how much money the State pumps into a fund, or gives to outside Venture Capital funds - they will not pay attention to Florida - until there is a consistent, high-quality influx of investment opportunities.

Even if they don't setup shop... a good company can raise capital from Funds outside of Florida.

I am excited about the future of Florida - because it has all the potential California did in the late seventies. Beautiful climate, influx of wealthy, retiring executives and innovative, growing Universities. We have a lot of essential assets to make a great place for entrepreneurs to live and create the next generation of companies.

Thursday, April 19, 2007

MOVO could do more then just market product

Anytime I am involved with a company, part of me would always like to see the company offer something "good" back to the community. There is always a humanitarian aspect to entrepreneurship, and here is one aspect I did not see when I co-founded Movo Mobile.

With the current events on everyone's mind - we look at the tragedy of the murders happening on high school and college campuses. The most recent ofcourse being Virginia Tech. And we all ask ourselves - "could have we prevented the tragedy". I think it is clear, that it wasn't obvious that this kid was going to become a mass-murderer - but one area that we can always improve on is communication.

Enter Movo. Movo ( has been working with universities over the past year to improve communication (mostly marketing) between the college and the students using SMS on cell phones. Although the original intent was to share information about classes, upcoming events and administrative alerts - clearly it can also become the next emergency broadcast system.

If Virginia Tech had the ability to send a SMS message to all their students. after the morning murders - would this have effected the murders later that day? Email was sent, but very few students were at their computers.

I am not questioning so much how the past was handled - but I am addressing how the future can be managed, and perhaps we can help prevent these types of tragedies through technology and innovative products like Movo.

I am proud to see one of the companies we started could play a role in saving lives - its nice to provide a service that extends beyond dollars and cents.

Read the Herald Tribune Article

Visit Movo Mobile

Thursday, April 05, 2007

Fast Pitch! brings Social Networking to Businesses

It's hard to believe that a small company in Sarasota, Florida could potentially be the next gorilla in one of the most dynamic markets on the web today - Social Networking.

For the first time companies like FaceBook and mySpace are adding substance to the hype of the Internet, and creating powerful communities of people who share content and build connections based on social highlights. mySpace was sold to News Corp for just under a billion, and the valuation of FaceBook exceeds 1B (turned down Yahoo's bid to buy them for 1.4B). Oh, by the way - this isn't a bubble either. These companies are driving serious revenue, serious growth and have the most valuable user base on the web today. Not only do they know who their users are, they know what they like, don't like, and more importantly what they want to buy.

Now, turn the page - moving from college to work, and focus on business. Enter Fast Pitch!. Fast Pitch has a community of users as well, but focused on building relationships based on business (however, their is always a social element). Business Networking has been around since the first dollar was exchanged, but more importantly networking is the life-blood of any business or professional's career. What a novel idea - network and market your business online, and bring people together based on simple criteria (e.g. where they went to college, what they are looking to buy, what city do they live in). Proof is in the stats - Fast Pitch! is ranked one of the top 4,000 websites in traffic in the United States, and 15,000 in the world.

After all, this is what the Internet was meant to be - a network of people, not computers.

So why is the future of Fast Pitch! so bright? They have a rapidly growing user base, customers that pay for the service (which is not easy to do - FaceBook and mySpace are free), and more importantly a network of business professionals that are actively buying and selling products and services, building relationships and adding content to Fast Pitch! every second of every day .... world wide.

One to watch.

Tuesday, March 20, 2007

Proposed legislation would give a tax break to early investors in small businesses

On Angels' Wings
Proposed legislation would give a tax break to early investors in small businesses
By COLLEEN DEBAISE, WSJ. March 19, 2007; Page R6

Proposed legislation winding its way through Congress could give angel investors a new incentive to fund start-ups -- and a more visible profile in the small-business community.
The Access to Capital for Entrepreneurs Act would provide a 25% tax credit to investors with a net worth of at least $1 million who make equity investments in early-stage small businesses -- the first time an investor would get a break for investing at the front end.

Angel investors -- traditionally, wealthy individuals willing to invest in a nascent business before anyone else wants to -- could use the proposed federal tax credit to offset as much as $500,000 of investments a year. But investments eligible for the credit would be limited to $250,000 per business to encourage angels to invest in at least two companies a year to get the full credit.

A Break at the Start

The proposal, introduced in late January by Rep. Earl Pomeroy, a Democrat from North Dakota, and Rep. Don Manzullo, an Illinois Republican, has gotten bipartisan support and an enthusiastic response from small-business groups, who say it will motivate high-net-worth individuals to invest in companies at the earliest stages. That's traditionally the most difficult time to obtain money, as start-ups don't yet have a track record to obtain a bank loan or enough viability to get access to venture capital. It's also the riskiest time for an investor, as the new enterprise could easily go belly up.


The Situation: Proposed legislation would give angel investors a 25% tax credit on investments of as much as $500,000 in start-ups.

What's at Stake: Small- business owners and others say the tax break will spur investment at the time firms need it most. But some people wonder if it also could lead to reckless investing.
What's Next: Proponents will spend the next few months lobbying for the measure in the House and Senate.

Proponents say the early-stage break would be a more effective tax incentive than a reduction in the capital-gains tax, which benefits an angel only at the back end, when a company is eventually sold or goes public and the investor records a gain on his or her initial investment. Currently, investors receive a partial exclusion of capital gains for investing in certain small businesses if stock in the business is held for more than five years.

"We do truly think that it will help spur investments," says Susan Preston, who researches angel investing at the Ewing Marion Kauffman Foundation, a Kansas City, Mo., nonprofit that supports entrepreneurship, and has consulted with members of Congress on the bill. "I've had angel group leaders tell me it will double their numbers."

But some do question the risks. The tax credit "may be fabulous, or it may have some unintended consequences," says Marianne Hudson, executive director of the Angel Capital Association in Vienna, Va., which officially has a neutral position on the federal tax credit. For instance, does a tax credit "really lead to investments? Does it make an investor invest in bad deals? Does it make people who shouldn't be investing invest?" The group, which was formed in 2004, represents 200 angel organizations in the U.S. and Canada and was formed to share practices, network and develop data about the field of angel investing.

Ms. Preston, who has provided angel capital to start-ups, says when investing in a small business at its earliest stage, "the risk is whether anything comes out of your investment, and that's a big risk." But the tax credit on the investment itself -- whether or not it eventually produces a return -- helps offset that gamble.

"You have to do your own analysis and make a determination that this company has a better chance at success than others," she says. But the tax credit "certainly provides that piece of incentive, 'I am going to do this investment because I can somewhat reduce the risk.' "
Underutilized Resource

Angels are the largest and oldest source of start-up capital for entrepreneurs, according to Jeffrey Sohl, director of the Center for Venture Research at the University of New Hampshire in Durham. But because the angel market consists largely of individuals who make investments quietly, little is known or understood about their practices -- making them one of the nation's most underutilized economic resources, he says.

According to the Small Business Administration's Office of Advocacy, there were about 25.8 million small businesses in the U.S. in 2005. (The SBA defines a small business as one with 500 or fewer employees.) And 671,800 of those were enterprises started that year.
According to the Center for Venture Research, in 2005, U.S. angels invested $23.1 billion in just 49,500 ventures, or about $470,000 a deal. Venture capitalists invested $22.1 billion in 3,008 deals, or about $7.4 million a deal, in the same period.

Investing in an early-stage company can be a lucrative proposition. There's little data on the subject since transactions are private, but the center's research indicates that angels typically look for businesses with the potential for a 20% to 40% annual return. For some investors, there's also a personal benefit: Many angels are successful entrepreneurs who have cashed out and now want to help others just starting out.

The investment is not without its risks, however, since many start-ups don't make it. Angels need to do due diligence to make sure the investment meets their investment criteria. Angels need to make sure the venture has a solid business plan, strong management team and viable exit strategy.

Sometimes, angels will take equity in the firm but require the entrepreneur to retain a larger stake, thereby making sure the entrepreneur has a vested interest in seeing the company succeed. In some cases, angels pool resources with other angels, forming angel groups or networks to mitigate risk.

Just a Start?

Mr. Sohl says that while a federal tax credit could provide some incentive to boost the number of angel investors, more needs to be done. European governments are "light years" ahead of the U.S., he says, often providing matching funds to angels willing to make an investment in entrepreneurs. Also beneficial would be educational programs that groom potential angels or raise awareness in the small-business community about existing angels.

"I don't want anyone to think [the tax credit] is the silver bullet that will increase angel investments," he says.

A tax credit for angels already exists in 21 states -- and both abuse and success have been reported.

In Hawaii, a tax credit for high-tech investment sparked controversy when taxpayers learned that investors got generous tax breaks for financing one-shot movie deals, such as the 2002 surfer-girl movie "Blue Crush," that didn't create postproduction jobs. The state ultimately tightened its rules for qualifying for the credit, known as Act 221.

In Wisconsin, however, where a 25% tax credit for angels who invest in early-stage Wisconsin technology businesses became effective in 2005, "our experience has been very positive," says Lorrie Keating Heinemann, secretary of the state Department of Financial Institutions. In 2004, before the tax credit, angels invested $2 million in nine companies, she says; in 2005, after the credit took effect, angels invested $19.5 million in 40 companies.

The state also helped create the Wisconsin Angel Network, a public-private initiative, to raise awareness of investment opportunities. Angels, for instance, can now get a tax credit for investing in state-certified stem-cell research companies.

"When we talked about angel investing a few years ago in our state, people didn't know what it was -- even the banks," Ms. Heinemann says.

Lobbying Efforts

Back in Washington, small-business groups that want the federal tax credit signed into law will spend the coming months lobbying for their cause. The fact that the measure was introduced so early in the new Congress could help their efforts. A similar measure was introduced in the Senate and House late in the last Congressional session -- by the same representatives and by Democratic Sen. John F. Kerry of Massachusetts and Republican Sen. Olympia J. Snowe of Maine -- but wasn't acted upon before the session ended.

A mix of small-business groups -- including Women Impacting Public Policy, the National Association for the Self-Employed and the American Nursery and Landscape Association -- has formed a coalition to support the bill. Barbara Kasoff, president of Women Impacting Public Policy, says an informal poll of the group's members, primarily women business owners, found that 30% might become angels if the tax credit passed.

She sees the credit as "opening the door for many other angel investors in this country who are not angels now."

Tuesday, February 20, 2007

MOVO takes the NBA mobile

Movo Mobile hits Vegas: Sarasota-based Movo Mobile, which was acquired in October by Naples-based Neighborhood America, handled Adidas’ mobile advertising campaign at this years NBA All-Star Weekend event in Las Vegas, Nev. Adidas’ ads were placed on more than 200 digital billboards throughout the city and subscribers were able to register through their cell phones to get ringtones, wallpapers, promotions and NBA venue information from the Movo. To see how it in action text "vegas" to 234327 or check out

Tuesday, February 06, 2007

Software is Dead. Long live the Web

Yes, its official - Software is dead (albeit dying a slow death) - but still dead. The shift from "double-clicking on an install CD" to loading up a web page has crossed over from simply a techno-shift to a economic-shift. What does the mean? It means there is no turning back. Let me explain.

A few years ago, you could see the rise of Software-as-a-Service (SaaS) as a new way to deliver high-powered applications over the web... but it lacked a lot of the "must-haves" a typical IT guy would want - whether its the "I like the GUI to be quick and responsive" type of IT guy, or the "I don't trust the security on the web" type of IT Guy - there was always apprehension in making a full transition to SaaS over your Classic .EXE.

But guess what. Nobody cares what the IT guy wants anymore... in the 90's budgets were high, and the IT guys were pumped-up superstars - cutting costs, improving operations and streamlining business - but now - the promises of yesteryear are looking bleak - and IT didn't deliver on the $150,000 Siebel install, and the $1.5M SAP Install, and the $500,000 Reporting software. Now business is business and IT is a service - which means no more big checks.

So what does this mean? It means there is an economic shift. "Pay-as-you-go" has become the mantra - and "License" is a four-letter word.

Risk is not an option. Companies don't want to pay up front, for a 2 year implementation, hoping the software works. Also, if your a startup - forget it. Nobody buys from a startup anymore. But I think the most important factor in the past few years has been the fact the "cycle of innovation" has grown shorter then the "budget cycle". Let me dive into this nugget. Essentially, 10 years ago - software vendors (especially startups) where innovating quickly and the big guys were having trouble keeping up. And due to the urgency to be competitive in the Information Age - the buy cycle for new technology was short. So - basically, only startups could keep up with demand, and building new/cool stuff. Well now, with the conservative nature of the economy, the "hype" sold by IT coming to light, and the budget cycle becoming longer (3 months to 3 years) - now the big guys don't have to innovate as quickly - because nobody buys new technology anymore - they want to see it baked. So it is nearly impossible for a startup to compete - because even though they have something unique - its not marketable. And by the time it is marketable - everyone has it.

This is why SaaS has won. Companies can implement "new" technologies with very little risk, because there is no heavy upfront license fee - they can pay-as-they-go.
So is this a bold prediction? Probably not. So what is my point? Don't invest in EXE companies. Long live .COM.

Wednesday, January 31, 2007

SaaS and Web 3.0

Check out what Kim Kobza (CEO of Neighborhood America) says about the next phase of the web

Broadly speaking, we think of Web 2.0 as including a second generation of Internet-based services likr social networking sites, wikis, and communications tools that allow individuals to collaborate and share information online in ways previously unavailable. Media, government, and business are quickly learning that Web 2.0 is creating an expectation of being able to interact with brands and issues that are most important to customers.

Web 3.0 will enable business to quickly embrace scalable, repeatable, and consistent methods of building social networks with customers and to manage those networks. By using SaaS businesses can meet the rising demands for customer interaction in a way that delivers immediate and tangible business value. SaaS is a simple solution to the universal problem of how to bridge the gap between traditional CRM and the demand for social networks created by Web 2.0 technologies in a way that honors the needs of business processes.

Read the whole article on CNET

PumpMedia Teams with Real Digital Media and Avocent to Offer Digital Signage Solution for Gas Station Retailers

PumpMedia, an outdoor media company, today announced the availability of a fully integrated digital signage solution for gas station environments. In partnership with Real Digital Media, a leading provider of next generation digital signage products for establishing point-of-purchase marketing, promotions and corporate communication networks, and Avocent® Corporation (NASDAQ: AVCT), a leading provider of IT infrastructure management solutions, the new offering enables digital signage networks to be seamlessly integrated at the fuel pump dispenser.

View the entire Press Release here