Friday, December 26, 2008

What is the economic impact of a Tech Startup? (Part I)

I thought it would be interesting to take a high level look at what the "economic impact" of a Tech Startup is on average. A lot of local economies are suffering because they either depend too much on tourism or real estate - or perhaps their core industries are dying (e.g. manufacturing, etc). Every local economy wants to diversify, but the big challenge is finding the best way to grow new businesses or convince other businesses to move to the area. Many times they shy away from "startups" because they are too risky, or don't present an immediate opportunity for hundreds or thousands of jobs - but in my opinion investing in startups is the best and ultimately the quickest way to creating the right kind of jobs, and boosting a local or State economy.

Here is my logic:

Lets start with the micro-economics of an average Startup. Most tech startup acquire venture funding. On average I would say 80% or so raise around 500k to 1M in funding (even the bad ideas get money in the beginning). The other 20% usually go on to raise more money - up to 5M or more. In States with concentrated Venture Capital, these stats change quite a bit - but I am being conservative in my estimates because my experience is in Florida (which is not strong in later stage Venture Capital).

So where does this money go? Well it goes to people, services, rent and marketing. And it is spent quickly. This is what makes a Startup an interesting catalyst for economic growth. Even though they don't have a lot of money in the bank - they spend it quickly (unlike larger more established companies).

So for example. compare an established 10M revenue 'non-tech' company, and a startup that has 1M in the bank for growth. I would argue these two companies have a similar economic impact in non-payroll type investments - e.g. Marketing, Outsourced Services, etc. Ofcourse the 10M company has a bigger payroll, but they most likely are not spending a large of money locally in new development, marketing or other services. So the startup may spend 250k-500k in these services in the first year or two, while the more established company has reduced its "growth spending" and is simply trying to find ways to cut costs, and maintain profitability.

So, then the natural discussion next is about jobs? Does a company with 30 employees (low-paid manufacturing, etc) have a bigger impact then a tech startup with 4 (high-paid employees)? Of course the amount of payroll is bigger with 30 employees - but my argument is that they make less of an impact, because they have less of an economic impact, because they are not spending outside the basic living expenses (house, food, clothing, etc). The higher paid employees are going out for dinner, buying big screen T.V.s and paying for dry cleaning. So although the non-tech established company is spending 100k per month on payroll, most of it is going to mortgages, groceries and gas.

So by now, you should see my position clearly - Size doesn't matter - Spending does.

POINT: Tech Startups and their employees' money has more impact on a local economy.

Now, lets look at long term impact. Obviously, the Non-Tech company will start to face more competition, and their product margins will shrink, and ultimately they will either need to move most jobs overseas or downsize. So now, the 30M revenue company is spending much less in the local economy. On the flip side - the Tech Startups will continue to grow (and yes, a few will die - but not until they spent all their money). Those that do survive, will grow quickly and become 5-10M revenue companies, with 10 times the economic impact of the 30M non-tech company.

So now you have a 10M revenue tech company - who needs to hire more high-paying jobs, and is spending more on local economic services - and ultimately will also spin off new companies as employees leave with their ideas and start new companies.

Final Breakdown

Take any local economy that wants to grow, diversify and make a real investment in building a strong business community - I would argue that putting 50 Tech Startups in that city, versus trying to get 10 established "non-tech' companies each having 20-30M in revenue to move to the area is the better choice.

At first glance, you would think its a no-brainer to choose the established companies. 50 Tech Startups = less than 100 jobs, no revenue versus 10 companies with 30M in revenue each = 300M in new revenue and probably 1,000 jobs.

For me, I would take the 50 Tech Startups - anyday. Even if they all fail, the economic impact over the short term will be greater than the established companies - and all the "jobs lost" if they did fail, would be entrepreneurs that would turn-around and startup something else.... and the cycle would be never ending as long as the local community supported them.

POINT: Failed Tech Startups does not mean jobs are lost - they just start something else and continue the cycle.

What does it take for local community to build a Startup Community. Simple.

1) Incubator run by entrepreneurs
2) Angel Investment Fund
3) Supportive Business Community
4) Strong Entrepreneurial community
5) Local Government support

(I'll save the details for next blog post)

Wednesday, December 17, 2008

If I were going to start a company...

I spend a lot of time talking with entrepreneurs online and offline, and many times the conversation ends up being about what types of companies would be good to start during these rough "economic" times (where investors and customers are hard to come by).

So, I decided to through some ideas into this blog -

First lets talk at a high level about what "type" of company would do well (before we actually throw out some business ideas).

First, the startup costs need to be low. It's a hard environment to raise money, especially around an idea with no product. So your best bet is to stick with Internet-based businesses. Second, the overhead needs to be close to zero. You can't have fixed costs killing you every month. Third, no inventory or big cost of sales. Fourth, the price point needs to be low (both business and consumer products).

So now, that we have a framework to work with, here are some ideas that I think have some potential (but still need some fine tuning):

1. WEBCASTING - This is the future of video on the web, and there is something intriguing about live video over the web. Companies like Stickam and UStream launched platforms that allow your to stream - but this is just the beginning. There is money to be made here in both consumer and business markets.

2. SOCIAL MARKETING - This to me is a no brainer. Anyone with some basic internet skills can build a nice business offering services to businesses by managing and marketing their social networking profiles. This includes mySpace, LinkedIn, Facebook, Twitter, etc. Every company should have an active presence on all these social networks, but they don't have the time or know-how to effectively build networks, communicate news and events and turn connections into profit.

3. PHONE APPS - If you have the technical know-how (or a friend who does) get working on building apps for the new generation of phones like the IPhone and G1 (Android) Google phone. This is a new frontier with limitless possibility. There are so many application ideas yet to be had. There may be a hurdle making money (unless your app takes off) - but eventually the model will mature and there will be "gold in them hills".

4. GPS (Where are you?) - GPS is now everywhere (phones, cars, etc). The idea of "location" is big and has a lot of potential in being the base for millions of application. Anything from "where's my kid" to "where was this picture taken" will be killer apps of the future. Everything will tie into GPS - and location will be a new piece of data we come to expect with anything and everything we see on the web.

5. IPTV - Youtube is just the beginning. Start thinking more about the content than the delivery of content. Just like industries of past, you need to learn that content is king, and platforms become commodities. Find ways of creating or getting your users to create dynamic content. Build a brand, and launch a media company that is 100% Internet. TV over the Web ("IPTV") will change the way all of us think about television in the future.

There you go... Five reasonably good ideas (or at least directions) where I could see real potential, and they are all somewhat market-proof. You can provide a lot of value for little cost, and ultimately scale the business as much as you can in this climate.

We are entering into a new phase on the web - and it is shifting from one side of the brain to the other... the "Creative Web" is rearing its head - and I think we will see the next set of millionaires and billionaires spawned from the Creative Side, and not the Plumbing side.

Saturday, December 13, 2008

Why "Bailouts" don't work - D.C. is not a V.C.

I find it somewhat entertaining watching CEO's of billion dollar companies like GM and Ford sit in front of Congress pitching their "business plan" and asking for money. This scene is all too familiar to me (and probably most startup entrepreneurs). The moment of clarity (and to some degree irony) for me was when the CEO's were asked if they could produce 3 year Pro-Forma financials for their business.


Are you kidding me? They flew to D.C. to ask for 35 Billion dollars and they didn't even bring a business plan that gave detailed financials? Are you ******* kidding me?

When any startup looks to raise capital and is asking investors to put in 25k or 50k, they show 3-year financials - and they don't even have any historical data to base it on.... so why on Earth didn't these guys bring it with them when pitching their "deal" to D.C.?

This is an absolute joke.

This is why Bailouts don't work
(believe me, as an early stage investor who has invested in many different companies that face bankruptcy often - I know a few things about bailouts)

1. Bailouts prolong Change. I have seen many startups continue to raise capital because they can't seem to reach profitability and they can't seem to gain traction on their business plan. Guess what. 99% of these companies fail (even after they get more money) because they refuse to change their business model. If you keep giving them money, they won't change.

2. Bailouts keep them Fat. Many times a business is gaining traction and closing sales, but their expenses are too high. They either hired too many people because they didn't run efficient, or they just don't know how to manage expenses. If you give companies more money to make ends meet - they won't ever make the hard choices to cut staff, improve efficiencies and reach profitability.

3. Bailouts reward Failure. Anytime you write a check to a company that is failing - you have to wonder why you aren't writing checks to those companies that are succeeding. This is a classic problem venture capitalists face when they look at their portfolio and consider follow on investments in their companies. They may have 3 companies dying and 3 companies are succeeding. Do you give your money to the ones failing (so you can hopefully turn them around) or do you give the money to the 3 that are growing (even though they may not need it - but you know it would help them grow bigger and stronger?)

4. Bailouts make Customers, Employees and Shareholders nervous. Anytime a business needs more money to survive, everyone starts to question the future. When you have employees nervous, then customers get nervous. When you have the CEO nervous, shareholders get nervous. The end result - you may have some money in the bank, but the company's brand is bankrupt. It becomes harder to convince shareholders to invest, customers to buy more product and good employees to stay.

5. Bailouts don't solve the problem. It is funny to me, that the Congress can question the CEO's of the car companies for days, but no one seems to address the real problem - Why are you going bankrupt? They dance around the question, but ultimately focus on why they should get the money. I believe the problem is that the car companies don't make a competitive product and they have fallen behind in technology and innovation. So does giving them billions to make payroll solve the problem? No. Does showing pictures of an electric car solve the problem? No. What will solve the problem? I have one idea - maybe we should try to get Americans to buy American made cars? Maybe that would help their business? If the Federal Government wants to see the car companies succeed - maybe they should focus on giving us (the consumer) reasons to buy American - like tax incentives when you own an American automobile. For example for businesses - allow any US corporation to write off any American vehicle. (I don't claim to have all the answers, but this would be a lot cheaper of a bill to pass - and it actually may sell a few cars).

Overall, we live and die in the Free Market system, and whether you are a 2 man startup or a billion dollar car manufacturer - I believe you live and die by the same principles. You have to make a competitive product, meet a market demand, and listen to your customers. If your business fails, then someone else will pick up the pieces, grab the marketshare and deliver product to those customers. This will happen in the car industry as well.

Millions of people may lose their job, and that is probably the hardest part about dealing with this crisis - but at the end of the day - they were going to lose their job eventually because they worked for a company that had shareholders that ignored poor management, outdated products and an inefficient operations. Why should I have to pay for some guys job in Detroit, when I could use that money to support my successful business?

I hope we learned at least one lesson in all of this - Management matters. The people we choose to run this country, run our corporations, run our schools, hospitals and military matter. Perhaps we will make better choices as voters and shareholders going forward. There are people to blame on both sides of aisle when it comes to our economic downturn - and my only hope is that this pain turns into action - and we make the changes we need to build a stronger future.

Friday, November 07, 2008

Why Community Matters...

It is easy to forget how important a community is to an entrepreneur, when you are heads down in a project and trying to launch a company. Most entrepreneurs (especially ones in the Internet business) may not consider their community an asset at all.
Just like the old days, when communities were built around the local steel plant and everyone supported local businesses because the knew that it would benefit their neighbor - the 21st century community needs to embrace some of the basic principals in building strong cities. Our businesses may be evolving - becoming global and selling to customers thousands of miles away - but I think there are some key principles that we need to continue to embrace in order to build strong communities and thus stronger businesses.
First lets talk about the basics - what does a startup business need?
Simple - 1) Help and 2) Customers.
Help can come in different forms - perhaps a local incubator or small business guidance program to help entrepreneurs find the right resources to solve their problems. Help can also be other entrepreneurs in the local community providing their services, or a local newspaper giving the new business some exposure by writing an article. Sometimes, an entrepreneur just needs a couple of breaks to get their business on track. Who better to offer this help, but the local community who has a vested interest in their success (e.g. economic development).
What if a business needs a few hands to help them do some work? How about a more aggressive internship program with local high schools or colleges as a way to help businesses.
And customers? Every business (and consumer) can be a potential customer for a new business in their community. If a company is spending the money on a product or service anyway - why not buy from a local company instead? Why not promote business-to-business transactions in local communities. Perhaps they will get better service - and even if its the same - they are supporting a local business which in turn can support them.
If any community wants to prosper in the 21st century, when the global economy allows for a worker in India to compete with a worker in Sarasota, Florida for a job - and when a product built in Orlando competes with a similar product built for half the money in China - then we need to go back to what made the American economy strong - the local community.
By supporting local businesses, you support your own business. By buying products and services from your community - you strengthen the local economy and more importantly you strengthen your community.
Here are my final thoughts:
1. If you are a business and buy technology or services from outside your community - reconsider buying from local businesses that offer the same service. Try them out. If they are the same or better - than why not buy local?
2. If you are a media company (newspaper, cable, etc) and you survive on advertising dollars - then perhaps take more time in talking about local businesses that are new - give them a boost when they need it the most. Perhaps down the road, when they have the money they will become an advertiser.
3. If you are a local school (college or high school) - integrate with the local business community. Provide internship credits to your students and give help to new businesses in the area. This helps startups grow when they don't have money to hire full time staff. The best lesson any student could learn is what it is like starting a new business.
4. If you are a local entrepreneur - take time to help other entrepreneurs by offering advice, resources or open your network of professionals to them to help connect them to the right people. Perhaps you can introduce them to their first big customer, or the key investor they need to launch their company.
In summary, the Community Matters. This idea that businesses can grow in a silo, and that the "global economy" eliminates the need to be local is wrong. Never in the history of our economy, has it been more important for businesses to find strength locally so that they can compete and prosper globally.

Saturday, October 18, 2008

A Business Plan for achieving Energy Independence

As an entrepreneur I am always looking at the world through my experiences and how I would approach different problems. And sometimes I even attempt to look at some pretty big problems, and wonder "how would an entrepreneur solve this problem?"

So, I spent a few minutes to analyze where we are in ENERGY, and put together a basic Three (3) Point Plan on where I see a potential Business Plan for our country.

If we assume the three major forces behind achieving Energy Independence are:

1) Cost of Energy
2) National Security
3) Environment

- then we can start putting together a plan to achieve these goals.

So lets look at the Cost of Energy first - and see where there is potential for innovation.

Here are the breakdown of costs for Energy:

OIL = 4.0 cents to 6.0 cents per kilowatt hour for oil.
NUCLEAR = 1.1 cents and 3.3 cents per kilowatt hour for nuclear electricity.
COAL = 3.7 cents to 4.8 cents per kilowatt hour for energy produced by coal.
NATURAL GAS = 3.5 cents to 4.8 cents per kilowatt hour for natural gas
SOLAR = 20.2 cents to 30.8 cents per kilowatt hour for solar.
WIND = 5.5 cents and 7.7 cents per kilowatt hour for wind.

Before we get into the details, I want to make clear that energy is complex... for example, take these two graphs.

Here is a graph showing what People pay for energy around the country

This map shows where our existing Nuclear Power Plants are in the U.S.

(footnote.... ) Notice if you overlap these maps, you can see how "Cost of Energy" and "Residential Average Price" are not directly correlated. There is a high concentration of nuclear power (cheapest energy) in areas where our residential costs are the highest. Also, if you notice Alaska has one of the highest residential costs for energy, even though they supply a lot of oil to the U.S. So you can see that we also may have some other factors at play that we need to consider in the long run (regulation, taxes, etc) - but for now, I am going to stay focused on the simple economics of cost, and how we put forth a plan to shift our energy sources to meet our goals.

So now, we understand that there are other factors involved that we may need to address - lets focus on some basic principles we can set forth now - and shift momentum in the right direction.

1. First, we need to look at why Solar, Wind and others are expensive. (My research shows its mostly due to the equipment (panels, etc) and the inconsistency of the source). So I would invest in innovation focused on building more efficient and cost effective equipment to capture, store and transport these high-cost energy sources. This may take 20 years, but I think in the long term using solar and wind may be the ultimate energy source in 2050.

2. Second, we look at the low cost alternates like Nuclear, Natural Gas and Coal. Each one of these have pros and cons (environmental effects, safety, etc). In my research, there needs to be investment in making these sources clean, safe and ensure proper transport and protection. There are costs that need to be considered as well (It can cost $15 Billion to build a nuclear power plant and ten years to build). I think a logical approach to leveraging these technologies is to focus our efforts on Natural Gas and Coal for the short-term, and begin to build Nuclear Power Plants in areas where we need economic boost with the goal to double our Nuclear capacity from 20% of our energy use to 40%. This costs us about 100B in subsidies in the past, and I think we can easily justify the investment today.

3., Third, we need to look increasing our domestic production of oil immediately and reducing our exports of oil. This is not a long term solution for reducing our addiction to oil, but I believe it is the right direction for transitioning into a energy independent nation. I would offer subsidies to oil companies that commit to ramping up domestic production BUT also include in their expansion plans to also build the ability for new facilities to offer alternative energy. This way, we are encouraging a more diverse long term plan, and accelerating our independence at the same time.

The second goal is National Security. It is clear from the political side of the argument, we believe our leverage in the Middle East for keeping the peace is to reduce the amount of Oil we purchase from the region. If this assumption is true, then we need to have a plan to reduce our imports from these sources.

First, let me break down the Energy trend (political and economic) so there is a clear backdrop to my plan. Here are some basic facts you may or may not know - so its important we are on the same page. (Source: Department of Energy and Energy Information Administration)

Canada 18%
Saudi Arabia 13%
Venezuela 10%

Mexico 10%
Nigeria 6%
Iraq 5%
Angola 5%
Russia 4%
Algeria 3%

So, as of today we are importing about 30% of our oil from countries or regions that negatively effect our national security.

So how do we reduce our dependence on these suppliers?

1) Increase imports from other nations. Start to work closely with Canada and Mexico (our neighbors) on increasing production and increasing our supply from these friendly nations. I believe if we structure a new plan based on Energy in North America, we can increase our imports from Canada and Mexico by 10% over the next 10 years, and meanwhile reduce our imports from the Middle East by 10% (eliminating the need to import from Venezuela for example) .

2) Increase domestic production. Although it may take longer to increase domestic production and may not help in reducing our addiction to oil, it is a path of transition that will allow us to break free of the Middle East. We currently product 5M Barrels a day and import 10M Barrels a day. If we can ramp our domestic production to 10M Barrels a day in 10 years, we can completely eliminate our need to import oil from Saudi Arabia and Iraq (Assuming we also have an aggressive alternative energy plan beginning to produce).

The third aspect to a plan is the Environment. When looking at all the sources of energy, it is clear which ones are considered bad for the environment and which ones are clean. Clearly, we need some major advances in technology to help us clean coal and make nuclear safe. But the bottom line, is that technology takes time - and although the Environment is a major concern for all of us - we need to be realistic on the timeline. It will not be possible to have 100% clean energy in the next 30-50 years. However, I do believe if we follow a plan to transition toward clean energy, we will reduce carbon emissions, and we will have a net-positive effect on the environment.

One issue I think we need to understand as well, is that the US is NOT the only country on the planet earth, and we don't control the environmental laws in countries like Russia and China which surely will continue to use oil, coal (dirty) and other fuels and have a much larger footprint on the atmosphere than we will. So, truly the ONLY way to make major moves in protecting the environment is for the US to invest in new / clean technologies and offer competitive products to these countries so that the obvious choice is to adopt. Only the Market can drive environmental protections that we believe are responsible for the Earth. We can't enforce our laws, but we can change the market dynamics and strive to become the largest exporter of energy in the 21st Century.

Overall, the more I researched the market, and understood the problem, and the potential for technology - I have become increasingly more optimistic about our ability to become Energy independent and diversify our energy to make for a cleaner world.

It is not a perfect solution (there never is a perfect solution) - we all need to embrace the reality that we need to sacrifice and work hard - but like any startup you put in the long hours, the sweat equity and against all odds build something great - and one day - your hard work is rewarded 100 times over....

Friday, October 10, 2008

Save the Entrepreneur - Save the World

As we sit and watch stock market plunge - and financial experts are scrambling to find words to explain why overnight our country has lost 30% of its value - I remain calm.

No, I am not in denial. Actually, for me none of this is new. As a tech entrepreneur I has seen the bubble of the Internet age, and I could see the housing bubble coming from a mile away. However, my point is not that I am a "financial oracle" - but rather - as an entrepreneur this is nothing new. Nothing here is new. The state of panic you see businesses in today - is what an entrepreneur wakes up with every morning whether the market is good or bad. Entrepreneurs live in an environment where this is always a "credit freeze" or "no lenders". Even when the market was at 14,000 -no bank would loan me money for my new startup. No bank would give me credit to make payroll.

In some odd way - I am amused by this chaos. Not just because I have lived in a microcosm of this type of chaos my entire career - but more importantly how people react to the challenges. As an entrepreneur - there is a certain acceptance of risk when starting a new venture. In fact, losing your entire investment in a startup is a standard disclosure to our niche economy.

Of the twenty-something ventures I have been involved in one way or another - I personally have never heard the words "BAIL OUT". In my 15 years of growing businesses, meeting payrolls, using credit cards to buy inventory and spending days and nights servicing customers and building value - I have never blamed a banker, politician or president for my failure.

I believe in a free market system. And I believe businesses should be left alone to succeed or fail. I believe the heart and soul of our economy is the entrepreneurial spirit that drives innovation and invention. I don't blame our current economy on deregulation, greed or politicians - I blame our economy on the mental shift away from what makes America competitive - the entrepreneur.
We have created an economy of perception. We have built value in our economy on transactions and not on assets. We have ignored innovation and expected our policies and products of 30 years ago can carry us into the 21st century. We have lowered the pressure on businesses and markets to innovate and scale - and simply allowed them to rest on their laurels of the past, and take home profit. Like a horse leading a race, suddenly breaking its leg - the jockey continues to whip - but we have fallen fast into last place in Global innovation.

What we are witnessing right now - is not just banks foreclosing on homes - but a foreclosure on entrepreneurship. As a nation, we have not kept our promise and payment on supporting innovation in technology and launching new ventures to diversify our economy.

I don't claim to have all the answers - but I do have the answer on how we save our economy.


Instead of pumping 700 Billion into buying bad assets and over-valued mortgages... why don't we pump 700 Billion (or a fraction) into innovation and development of new companies?

Here is a simple plan that I believe makes as much sense (if not more) than a 700B bailout of wall street:

1. Energy Independence - Not only does energy off the most promise for new jobs in America, it also allows plays a big role in foreign policy. There are multiple paths to developing alternative energy, but we need entrepreneurs and heavy investment in science to make this a reality. Safe nuclear, clean coal, affordable solar, stable wind are all viable paths - but we need to invest in technology and entrepreneurs. Simply by investing 10-20 Billion a year into energy could create hundreds-of-thousands of jobs, create thousands of companies and re-instate our position in the global economy at the #1 supplier of energy.

2. Health Care - Want to find a way to offer more health care to more people, and at the same time not increase taxes and make policies cheaper? There is only one answer - technology. You can cut 20-30% off operations, and another 15% off the cost of processing if you build a digital backbone to the health care industry. Every other market has become digital - yet we still operate health care like we did in the 1980's. The problem is not that there isn't any technology or lack of interest - the problem is that the government has not put the pressure on the industry to raise the standards. In order to force a mass adoption of digital standards and to incur the cost of going digital - there needs to be a forceful entity to pressure hospitals, insurance carriers and even the patients and doctors.

I would estimate a government assistance program for this type of project would cost around $50 Billion to invest in innovation, infrastructure and tax breaks to corporations who meet the standards set forth by the project. I think we could achieve 80% transfer of data off paper in five years - if we were able to provide incentives and advance HIPAA to force all parties to make it happen.

3. Jobs - See #1 and #2. Not only are these major undertakings but they are catalysts for hundreds of thousands of high-paying jobs. All the workers looking for work after the auto-plant shut its doors, can easily be trained and hired to manufacture solar panels. All the workers who can't build buildings due to the real estate market crashing - can begin to build nuclear power plants, clean coal plants and wind/solar plants. All the jobs lost in middle-management and operations can be put to work helping health care companies make the shift from paper to electronic business. There are natural shifts in our workforce that have to happen in order to create new jobs. We can't "save jobs of the past". We need to look toward the future.

Also, I would suggest we invest heavily into startups to tackle major problems, and fund them similar to the SBA was formed to do - but managed by Venture Capitalists with a mission to transfer our economy. This itself would create jobs due to the investments made into these startups.

I would launch a Global Innovation Fund where we segment into 5 key areas 1) Energy 2) Health 3) Poverty 4) Security 5) Communications. This fund would allocate 10 Billion dollars per year (2 Billion in each category) that would invest in existing and new companies and technologies that focus on these areas, and specifically the goals set forth in each category.

For example, under ENERGY would be goals like 1) Reduce carbon emission of coal by 80% (Clean Coal). Much like we fund universities to innovate by providing grants - we would invest into these companies and facilitate solutions. The big difference between giving a professor a million dollars - is that he/she is not driven by a timeline or market demand. They use that million dollars to experiment and to discover - with no clear mission to deliver a product to the market. This major change in purpose would make the investment make more effective and deliver results to the market.

Not only would the Global fund invest in technology here in the U.S. but also in other countries. We could lure the best minds and inventors from other countries like China, Russia, Japan to move their operations and companies to the US, by leveraging this fund as a way to monopolize innovation for the next ten years. The requirement of the fund would be to only invest in U.S. company, but not limited to importing technologies from around the world and force them to move.

If we truly want to be a leader, we need to invest. Not in mortgages, not in banks, and not in securities - but in entrepreneurs.


Monday, October 06, 2008

A New Venture - ThisWeekIn.TV

Startup Florida launched a new venture - ThisWeekIn.TV.

The company focuses on bringing targeted advertising to tourists through the televisions located in hotel rooms.

Leveraging Internet-enabled Digital Sign technology, ThisWeekIn.TV is a dedicated channel for tourists to view upcoming events, travel information, information on the local community and of course advertising.

The power of the medium, is that for the first time is connects real-time content from the Internet (e.g. RSS feeds from local event websites, videos from online video sources like Youtube) and the traditional outlet of Television sets in hotel rooms across the community.

The dynamic of real-time content coming from an unlimited source (Internet) has great potential, and we expect to see a lot more innovation coming in this area.

Saturday, July 19, 2008

The Funding Flow Chart

Are you an entrepreneur looking for capital? If so, I hope this blog post gives you some level of advice that you will find useful. Raising capital is one of the most difficult things to do as an entrepreneur - but if you follow this basic flow chart - you may be able to make it a little easier.

1. Do you have a working product with a price and a customer?

If yes, continue to next question.

If No, please stop looking for funding and build a product and sell it to a customer. If you need money to build the product, then get a job or dig into your savings and fund the development yourself. If you can't afford it - dump your idea - and find a product you can build. Or find someone who can build the product and figure out how to compensate them (money / equity).

2. Do you have any experience building a company and taking a product to market?

If yes, continue to next question.

If No, then this is your chance to get experience. Find a way to turn one customer into 10, 20, 100 customers. If you don't know how to do that - ask someone who has. Find a mentor to help guide you.

3. Do you still (absolutely) need capital? Even though you are growing revenue and have a clear path to profitability?

If yes, continue to the next question.

If No then, congratulations - you now are in control - and Investors would love to give you money (although I suggest you not take it).

4. Do you want to trade off your freedom, absolute control and ability to run the company the way you want to for a little cash?

If yes, continue to the next question.

If No then, continue the grow the company until you are in a better position to either loan the money or fund growth through profit. (It may take a little longer to grow revenue, but it beats losing control of your company)

5. Do you need the capital to help fund your salary?

If yes, continue to the next question.

If No, then - return to #3.

6. Are you really an entrepreneur?

Thursday, July 03, 2008

A New Direction (for Startup Florida)

It has been six years since we started Startup Florida. We have accomplished a great deal, and have learned much more than we ever thought possible about Venture Capital, starting ventures and ofcourse the entrepreneurial community in Florida.

I am very proud of what we were able to accomplish (despite the failures). We broke new ground in the angel investment community, and we were able to put together a nice portfolio of companies for our investors. Overall, we executed the model we set out to explore.

Now, with any business - we will adjust how we operate based on our past experience. We re-evaluated the market, looked at our successes and failures and hope to refine our model.

As of today, we are launching a "new" Startup Florida. If I was to describe the change in one word it would be "simplification". Our goal is to simplify our model, and ultimately try to recapture the "raw" entrepreneurial spirit of launching new ventures.

The first step we took was to analyze each venture we started or invested in, and look for obvious mistakes we made. The second step was to list what we did right in those ventures that have done very well, in hopes we can duplicate the recipe. And the final step, is to really dig into the numbers and see which deals will ultimately reward us with dividends.

Here are some conclusions we made:

1. The startups that did the best were ones we came up with the idea. Ironically, as a "venture firm" we ultimately read the market, and formulated better business ideas than most entrepreneurs who came in off the street.

2. The startups that did the best raised the LEAST amount of money. This is probably the most disappointing statistics. I am not sure if it is because the "good ideas" took off quicker, thus required less money - or perhaps it is more fundamental than that - and the companies that had less money focused on building a business, and not becoming a "road show" wasting time and energy on raising capital instead of building a business.

3. The startups that did the best kept costs modest and didn't hire anyone (until they were profitable). Another crazy stat - but very relevant. Again perhaps the product they built didn't require a lot of resources, but it is a very key point of reflection.

Overall, you can see where our conclusion become obvious on where we needed to take our business.

1. We needed to focus on what we know. (Internet technologies)
2. We needed to focus on smaller investments. (Seed Round)
3. We needed to be part of the "idea" phase. (Co-Founder)
4. We needed to be involved.

So now we are doing just that - simplifying our model, and looking to duplicate the success we have had following the rules above.

Please check out our new Website -

It goes into more details of our new model

Thursday, May 08, 2008

Florida Venture Forum has Arrived.... Finally!

I have been a critic of the Florida Venture Forum since its inception... mostly because of the lack of really national quality deals, and also the absence of any really active venture capitalists or angel investors.

BUT, this year, I have to say that the FVF has brought it's A Game. After reviewing all the companies presenting this year, I have to say this is one of the best group of presenters I have seen anywhere (much less Florida).

Also, I am excited about the Early Stage Presenters -

The presenters are diverse, and the technology is impressive.

One company (spawned from UF) WiPower, Inc. ( has wireless electricity as a core technology, and has constructed a plate where you can put your cell phone and other chargable devices on the platform to charge (sans any wires).

Another company turns Air into Water, for applications where clean water is scarce.

I highly suggest checking out this years presenters and going to the show. It looks like Florida is finally bringing great ideas and technology to the Forum, and will begin to shine as a place of innvovation.

Monday, February 04, 2008

A New Market for Tech Entrepreneurs - User Content.

(User) Content is King

With all the buzz about Microsoft's mission to own Yahoo! and their recent investment in Facebook (for a ridiculous valuation) - it shows a clear sign that we are entering a new era for the entrepreneur and the tech economy. Not only are the big tech companies re-defining their 10-year vision, but the "users" are truly in control of the market for the first time.

Here is why the "users" are in control:

1. Software is Free. Whether you download freeware or make your own, software is no longer being purchased by the masses. In fact, users have taken the initiative to build their own. "Open Source" has been a buzz word for a long time, but it was too complex to implement and build market share. What needed to happen was the "cycle" of users to get sick of paying top dollar for software, and for the Open Source and Shareware market to spawn "market-driven" companies that upholds the spirit of sharing and "free use", but can build a solid product. In the next five years, users won't pay for software - and they shouldn't because most of the crap on the shelves is way over-priced and not meeting the needs of the average user. There is an adjustment happening right now, that is forcing software companies to adapt to a web-based model, and be more aggressive on pricing.

2. Social Networks and Blogs are dominating traffic. For the first time, Users are truly making the decision on where they go on the web. I know it sounds weird - but for a long time, users were driven to websites by the advertisers. Five years ago, a user would hit a website because they saw an ad, and rarely because of "word-of-mouth" or through smarter search engines. Now, with better search engines, social networks and an Internet where users determine what is good content (ala Digg, Social Bookmarking, etc) - the advertisers don't have enough money to move users to where they want them to go. Now users are driving most of the content, and also driving the trends of traffic. This poses a major problem for media and anyone that intends on selling traffic - because the user is now in control of the wheel and (by the way) can skip the middle man and make money from their own content and traffic.

3. Users are the economy. The shift that is happening is actually very scary. The web economy has always been based on some of the same basic elements of any media - users, clicks, impressions and transactions. And for the most part, there was a middle-man to broker all these products. The is no better example than Google, who is essentially brokering the users time on the web to advertisers. Every page you visit, they display ads... you click on the ad.. they make money. BUT! there is a problem in this model. Google is assuming that users will continue to "aimlessly" browse the web, and not learn and become a "smarter" user. This is the flaw in their model, and ultimately I believe will effect their business. Just like the banner ad business in the late 90's... people at first would click on banners - but then would naturally start ignoring the banners because they typically did not go to a content-rich website, but instead tried to sell them product they didn't want. The "Google Ads" will fall victim to this as well, and when users stop clicking Google Ads.... the Content owners will start to look for other options. The entire "Google Economy" is dependant on user behavior. Why would people stop clicking on ads? Simply... because they no longer use the web to simply search aimlessly - but not have "stuff to do" - the rise of blogs, social networks and other web-based applications takes away time from surfing and thus aimless ad clicking. Don't believe me - read about why Google is reporting a poor performing quarter. They claim users on social networks aren't clicking ads. People aren't searching anymore... they are using the web - and the "ad-based" economy will suffer.

So my point is this - if you are looking for the next killer app? Focus on this trend. If you are building a product that you are licensing (software), or selling advertising (PPC, etc) - then you may want to reconsider your model.

If you want to make money - you will need to provide real value to the user and allow them to share or dominate your profits - and embrace the new economy on the Internet, where it is completely based on one thing - "User Content". The days of clicks, impressions and licenses are over.

Sunday, January 27, 2008


Before you read my "rant" - I would like to first admit that I do NOT pretend to know more about politics, government or economic theory than the average person. However, I always feel like a different perspective than what is offered in talking points by the two parties is always refreshing.

The following is an entrepreneurs take on the big issues facing the country. I am not for making the government more powerful - but I am for making the government more focused and efficient.

Here we go. 10 simple ways the government can change the course of America.

#1 - Term Limits - Eliminate "career" politicians. Only allow any elected official to have a maximum of 8 consecutive years in office.

#2 - Flat Employment Tax + Consumption Tax - I realize the Tax code is complex. But at the end of the day - why is it so difficult to implement a tax code that can be based on simple concepts like "The more you use, the more you pay" and "The more you invest, the more you get back".... We always talk hear "this reform hurts the poor" or "this will over-tax the rich".... what I am looking for is a tax reform that taxes people that take and do not give back. For example, if a millionaire invests money into the US economy or jobs - he gets the benefit that outweighs the tax he gets hit with on his beach-front home. However, if a millionaire is not investing in charity, the economy - but simply taking and not giving back - he should be taxed. The best way to save our economy and support entrepreneurship is to recognize those people who help our economy and our community - and penalize those who don't.

#3 - Take Guns off the Street - I know, I know - The Constitution says we have the right to bear arms. Ok, I get it. However, I think the spirit of this was to protect our homes in defense. So here is my proposition - no concealed permits. No carrying firearms in public. If you want to protect your home, or go kill some deer - fine. But no guns on the streets. Also, no automatic weapons. We have a major problem with violence in this country... and Government can't change the way we raise our kids - but the least it could do is stop allowing the sale of semi-automatic weapons. (If you are thinking "Screw you - I need my guns" - wait until your 13 year-old son is shot at school... then tell me if the 2nd Ammendment can bring back your boy)

#4 - Stop Credit Card Companies from becoming Loan Sharks - To many people are given too much credit by banks. Many times with outrageous interest. This country is too dependant on credit. It has become an addiction. I don't see why abusing credit is not too different than gambling. The credit card company is the loan-shark, giving you points on money you know you can't pay back. Don't get me wrong - I think Credit is a powerful tool for people to buy homes, cars and other necessities in life - but I think the credit companies need to stop abusing their license to loan. I think the government needs to regulate banks and how they issues credit cards (not all loans). The first step is make it illegal to solicit business through mail. They make it too easy for people to fall victim to their "scams". (Personally, I think all junk mail should be illegal... but this is one that would make a difference)

#5 - Make All Utilities (including Gas) Tax deductable - What a great way to create a check and balance system for "Big Oil" and Government. Not only does it motivate Government to find ways of keeping our energy costs low, but it also makes them feel the pain and focus on smarter energy. This also helps the poor guy who makes minimum wage who drives 60 miles to go to work - and at the same time helps the rich guy who has a yacht and needs to gas it up every weekend. Its a win-win-win.

#6 - Mandate Insurance Rebates - One of the big issues facing many people is the rising rates of insurance (home, risk) and even professionals like doctors are getting killed on insurance for mal-practice. Yes, insurance is necessary - and I realize the system is very complex. But here is a simple way we can help (again, using my simple philosphy of those who do good, receive the benefit). Create Insurance Rebate system where those people who DON'T get sick, or DON'T wreck their car, or DON'T get sued for mal-practice receive a rebate on their insurance. So for example, if I pay $3,000 a year in health insurance, and I don't go to the doctor that much - then I get a rebat of X% that is applied to next years bill. Perhaps its $600 I get back and then I only pay $2,400 next year. Again - this mirrors my thoughts on how taxes should work - based on consumption and abuse. (Also, I look at this like a win-win - because the insurance companies will retain their customers, and motivate them to think twice before driving fast or reporting a false claim - this is clearly a WIN-WIN).

#7 - BUILD INFRASTRUCTURE FOR 2050 - I know this may sound weird - but call me a futurist. Let's look at the basics of why economies flourish, and some die. One of the basic components of having a thriving economy is "access". Remember the old days - before railroads, before the steam engine - not much economy was there? It's not different today. We need to invest billions in our infrastructure. We need to make every major highway bigger. We need to build more high-speed trains, and improve our cities core infrastructure. Congested traffic means less people leave their home to spend money. More traffic means more wasted energy. The more difficult for people to get to and from work - makes it hard for the average american to make a living. We need better infrastructure, new highways, and a new vision for transportation. We need to plan for the next 50 years.

#8 - Pay Kids for attending and accelling in school - Simple. Back to the core concept of "do good, and you will be rewarded" - this is the basic of the American Dream. Work hard, and good things will come. Why not teach this to our youth? For kids to maintain certain grades - we should reward them. Not with stickers and smiley faces. We should reward them with money. Why? because they deserve it. They probably deserve it more than the millions of people on welfare that could get a job, and decide its not worth the effort. I can't think of a better place to invest than Education. How do we pay for it?? Simple - State lotteries, tax rebates to large corporations in the short term - and in the long term it will pay for itself - because we will have more tax payers, less dropouts, less crime and less welfare to pay out.

Another reason why this is a great idea - the money will go directly back into our economy. The money we pay out to kids will go right into our service and retail economy. Maybe (just maybe) some of it will go to a savings account.

Here is some perspective. There are about 50 million kids in high-school and elementary school. Lets say we paid those kids who stay in school (based on attendance) $100 per semester ($400 per year). And for those kids who maintain a 3.0 GPA we pay $200 per semester ($800 per year). Assume we paid out 80% (probably way too high) of kids with good attendance. It would be about 40 Million kids with good attendance = $16 Billion and for good GPA (20% of kids) = $8 Billion. So call it roughly - $25 Billion dollar program per year. Sounds like a lot??? Not really - we have spent $500 Billion on the War in Iraq (that is basically 20 years of my Education Incentive program)

#9 - Tax E-Mail - Don't call me a liberal. I hate taxes as much as you do. But this is actually something that makes sense to me as a taxpayer and someone who hates "Spam" :).

Here are the staggering stats - Over 90 billion messages a day are sent over email. Of which 90% is spam. So lets call it 80 Billion unwanted emails.

I don't think "spam filters" are the solution. If you want to kill something - tax it. So this is actually one of the few times I agree with a tax. Let's say we said "For every email sent we taxed it a penny" (maybe we have an exception that reads "each person is allotted 1,000 emails per month) - this avoids for individuals from the freedom of using the web. The target here are the companies that send millions of "spam" messages a day.

One of two things will happen - Spam will stop - or the government makes money on its new tax. 80 Billion messages per day will result in over $300B a year in tax income. Guess what - I just paid for half my suggested programs above AND reduced annoying emails in your inbox.

#10 - Reward the Family - In my opinion the long-term solution to all the social challenges the country faces - is getting back to supporting the basics - the family. Specifically, there are simple things we can do to rebuild confidence in the american family and show that the government rewards those who work hard. One of the biggest changes I believe could help build stronger support for the family is giving single-income homes and small business owners (entrepreneurs) tax advantages. Today we penalize people for "going on their own to start a business" and we penalize "parents who stay home and choose to raise their children". Maybe I am confused - but aren't these the very things we need to encourage - or atleast support? I am not trying to tell women (or men) to stay at home and not chase their dreams... instead, I am saying "for those who stay at home to focus on family - or for those who are creating businesses and jobs - we want to support you."

I am sure I can think of a few more - but I think 10 is nice round number. If I think of something, I will make sure I add it. Of course my goal was to outline some very simple ways government can re-align with American values, and without over-taxing or being "big-government" - ways that it truly could change the course of America for the better. (atleast I think so).