Monday, June 30, 2008

A cup of coffee and wheat toast

Seth Godin writes one of the world's most popular blogs. If you're not reading his blog on a regular basis, you're missing out on a great resource.

Traditional advertisements on TV and radio are classified by Seth as interruption marketing, which interrupt the customer while she is doing something of her preference. Seth introduced the concept of permission marketing where the business provides something of value to the customer and thus obtains her permission and then does marketing.

Recently, Seth posted a nice, tight taxonomy of marketing, breaking it down into five, easy pieces: data, stories, products, interactions, and connections. I encourage you to take some time to appreciate his succinct, wonderful post.


Tuesday, June 24, 2008

17 Mistakes Startups Make

John Osher started Dr John's SpinBrush in 1999 to make a $5 electric toothbrush. He sold the company to Proctor & Gamble 2-years later for $475M. John, who apparently knows something about startups, has come out with his list of the 17 mistakes that startups make. Great reading for anyone who wants to avoid these common pitfalls. Here are some of my favorites:

Mistake 1: Failing to spend enough time researching the business idea to see if it's viable.

Mistake 4: Overprojecting sales volume and timing.

Mistake 6: Hiring too many people and spending too much on offices and facilities.

Mistake 14: Lacking simplicity in your vision.


Monday, June 16, 2008

VentureLab company Suniva to build first plant in Norcross

VenutreLab company, and current ATDC resident Suniva has announced plans for a 60,000 square foot manufacturing facility in Norcross, just north of Atlanta. Suniva will be building the some of the world's most efficient solar cells. This is a big win for Suniva, for the State of Georgia and for Gwinnett County. This is such a big deal that it was announced at the State Capital by Governor Sonny Perdue.

Suniva was founded by Dr. Ajeet Rohatgi of the School of Electrical and Computer Engineering. Dr. Rohtagi is also the founding director of the University Center of Excellence for Photovoltaics.

Suniva has also recently raised over $50M in venture capital led by New Enterprise Associates. Suniva is putting together a stellar management team, which includes former VentureLab Associate Director Jon Goldman.

We are very proud of the achievements of Suniva and see them as a terrific example of how the VentureLab process can lead to commercialization success.


Wednesday, June 11, 2008

Maybe that is your third product

When I meet with entrepreneurs or Ga Tech faculty/researchers, many times they have a grand vision of their technology and what their first product will look like. It can be exciting and compelling. However, that product idea is usually quite complex and would require a significant effort to get it built and launched.

My response is to instead suggest that their idea would make a great third product. From then we start to talk about what their first product could be. Product 1 should be quick and easy to launch. It should be sold to the same poeple you think would buy Product 3. It should not have too much technical risk. It is probably not very exciting. And, at best, just plan on breaking even. There should also be a second product that acts as a link to the third product on your roadmap. We are creating a ladder.

Why do this?

  • The first product gets you into the market faster.
  • You start generating revenues much earlier in the process, reducing business risk.
  • You reduce dilution from having to otherwise take on more startup capital.
  • You learn from your customers. No matter what they say in a market survey, you don't know what people really think until they have to spend their money on your idea.
  • You will find out which of your assumptions are wroing and what parts of product 3 need to be changed. If you launched product 3 first, you would never know.
Product 3 will most certainly look much different than you originally envisioned. That is due to the knowledge you gain from being in the market that cannot be achieved any other way.

What are the first two rungs on your product ladder?


Simatra awarded $1.5M Phase II SBIR

VentureLab company Simatra Modeling Technologies recently was awarded a Phase II SBIR grant to develop their approach to solving math problems blindingly fast. The award from the NIH was for the application of computational biology. The great news is that many other applications can also take advantage of Simatra's technology.

Congratulations to the team at Simatra. You're going to be hearing a lot from these guys.


Sunday, June 8, 2008

The Ultimatum Game: Can community driven services make money and survive?

This post was inspired by Clay Shirky's new book - Here Comes Everybody.

The Ultimatum Game is a famous social experiment. Two people are involved. One is given ten dollars and told to split it between the two participants in any way he wants. The second person can decide to accept his share or deny the deal altogether - neither one gets anything. Rationally, the second person should accept as little as ten cents. However, unless at least $2 is offered, the second participant usually rejects the deal and no one receives anything. Why? Humans have a strong emotional instinct for fairness. They would rather suffer than to let someone else make out unfairly, in their eyes.

Clay Shirky uses the example of AOL Community Leaders, basically volunteer guides. These people were happy to help other AOLers enter the world of AOL and the Internet. Happy at least until AOL's valuation rose into the 10s of billions of dollars. Community Leaders felt they a big part of why AOL succeeded. Most dropped out. Why work for free just to make AOL more money?

So, what about Wikipedia? What happens if they start to monetize the site and take in a few hundred million dollars per year? How will the volunteer contributors and editors feel? Will they continue to support the Wikipedia with as much fervor as they do now? The Ultimatum Game suggests they likely won't. Which would destroy the value of Wikipedia.

What about other user-driven sites such as Digg and Craigslist? What about open-source projects such as SugarCRM or MySQL now that Sun has purchased them? They had best tread carefully or risk losing their franchise.


Friday, June 6, 2008

Failing up

Great graduation commencement speeches are rare.

Steve Job gave an oft-linked one to Stanford in 2005. "Stay Hungry. Stay Foolish" was, to me, the epitome of just such a legendary speech.

I must place emphasis on the word was.

The new contender was just delivered to the Harvard Class of 2008 by J.K. Rowling. It's a master class in composition, compassion, and purpose. Behold.


Thinking of Raising Money for your Startup?

Raising money for your company is brutal. It is time consuming, frustrating and can be a real blow to your ego. And that's if you already know what you're doing. You are dealing with people who invest money for a living. You, on the other hand, have likely never done this before. There is a lot to learn about the process - far more than you can imagine. Don't wait until you need capital to start learning, then it will be too late. You need to being the process of educating yourself now. Here are three resources that I would suggest you go to.

A great place to start is Venture Hacks. Here you will find dozens of articles detailing what you need to know when you begin the process of dealing with venture capitalists. Detailed instructions on how to pitch, how to negotiate, how to build a board. Also invaluable are the sections on the meaning of all those terms in a term sheet and how to get the best deal for you and your company.

Another amazing resource is Ask the VC. This is a Blog run by Brad Feld and Jason Mendelson with The Foundry Group in Boulder, CO. The blog is a running series of questions from entrepreneurs about raising money and forming companies. It is excellent. They also have a full archive of past questions.

It would be great if someone could summarize all of the best practices for raising capital into a book. Well, someone sorta has. Stephen Fleming has taken his series of blog posts on Raising Capital and combined them into a single PDF you can download and print. Even if Stephen wasn't my boss, I'd probably still recommend it.


Tuesday, June 3, 2008

Are you an aspirin, a vitamin or a condiment?

When we look at commercialization opportunities, one of the things to consider is the type of product that can be created. One well known test is to ask if the product is a pain-killer or a vitamin. In other words, does the product solve a big problem for someone? Or, does it simply make things a little better? Another way of looking at this is to ask is: Is it a "must have" or a "nice to have"? In the IT/Software space, examples of vitamins might be security monitoring tools, web portals, social networks, email spam filtering, Google Analytics, Twitter, YouTube. Examples of pain killers might be compliance tools like Oversight Systems, databases, storage virtualization, and CRM. Some products are both depending on the situation. Data backup is nice to have, until you lose your data, then it is a must have.

As bad as being a vitamin might sound, there is something worse. That is to be a condiment. Condiments are just there. Something you sprinkle on top to finish off a dish. Can you live without it? Sure. Do you notice it when it is missing? Rarely.

No offense to the nice people at StumbleUpon, but that's definitely a condiment. Other condiments would have to include MyBlogLog, iLike and just about every widget ever written for Facebook.

Don't be a condiment.


Sunday, June 1, 2008

Replace the Lightbulb, Win Money

Thomas Edison's invention has had a nice run. Maybe it is time for a new innovation to replace the venerable light bulb. The Department of Energy has announced the L Prize. The goal is spur innovation in solid-state lighting. Up to $20M in prize money will be available.

25% of the electricity use in a typical home is for lighting. Compact fluorescents can reduce power by 75%. The L Prize hopes to spur innovation to reduce the power required by a 60W incandescent bulb by as much as 90%. Got an idea?